Asked by Adrian Batista on May 08, 2024
Verified
A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x,
A) social cost = private cost = private value < social value.
B) social cost > private value = social value > private cost.
C) social value = private value = private cost < social cost.
D) social value = private cost = social cost > private value.
Social Planner
An idealized figure in economic theory responsible for designing economic policies or interventions to achieve optimal allocation of resources and welfare in a society.
Social Cost
The total cost to society, including both private costs incurred by producers and external costs to other parties not involved in the transaction.
Private Value
The value of an asset or service as perceived by an individual or entity, not necessarily reflecting its market value.
- Investigate the consequences of positive and negative externalities on private and collective benefits and expenses.
Verified Answer
SC
Student Cole KronerMay 14, 2024
Final Answer :
C
Explanation :
In option C, the social cost of producing good x exceeds all other values (private value, social value, and private cost), indicating that the production of good x imposes a greater cost on society than the benefits it provides. Reducing the output would align the production more closely with societal welfare by minimizing these excessive costs.
Learning Objectives
- Investigate the consequences of positive and negative externalities on private and collective benefits and expenses.