Asked by Daysi Antillo on Jun 22, 2024
Verified
The problem with common resources is similar to the problem with negative externalities because:
A) both issues deal with natural resources.
B) the marginal social benefit of producing another unit exceeds the individual's marginal benefit.
C) the marginal social cost of producing another unit exceeds the individual's marginal cost.
D) the individual's marginal cost of producing another unit exceeds the individual's marginal benefit.
Marginal Social Benefit
The extra advantage to the community when one additional unit of a product or service is made.
Negative Externalities
External costs.
Marginal Social Cost
Marginal social cost is the total cost society bears for the production of an additional unit of a good or service, considering both private costs and any external costs.
- Comprehend the concept of socially optimal use of common resources and the factors leading to its deviation.
- Understand the principle of marginal analysis in the context of common resource use and market failure.
Verified Answer
MS
Mohdeep SinghJun 26, 2024
Final Answer :
C
Explanation :
Common resources and negative externalities both involve costs that are not borne by the individual producers or consumers involved, but rather by society as a whole. In the case of common resources, the marginal social cost of producing another unit exceeds the individual's marginal cost because the resource is being overused or depleted. In the case of negative externalities, the marginal social cost of producing another unit exceeds the individual's marginal benefit because the cost of the external harm caused by production is not accounted for by the producer or consumer.
Learning Objectives
- Comprehend the concept of socially optimal use of common resources and the factors leading to its deviation.
- Understand the principle of marginal analysis in the context of common resource use and market failure.