(Table: Externalities from Parks) Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.The socially optimum amount of land dedicated to the public park will be _____ acres.

A) 0
B) 1
C) 3
D) 9

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Akshay Sharma · Accepted Answer

Final Answer : C, Explanation :  The socially optimum amount of land dedicated to the public park is where marginal social benefit equals marginal social cost. From the table, we can see that this occurs at 3 acres, where MSB = MSC = $900. At this level, the total net benefit to society is maximized. Choosing any other level of land dedicated to the public park either results in a net loss or a smaller net benefit to society.

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