(Figure: Model of a Market for a Common Resource) Use Figure: Model of a Market for a Common Resource.The figure shows the intersection of the private supply and demand curves.Without any consideration of the marginal social cost of using a common resource,the quantity of the common resource used at Q will be: Figure: Model of a Market for a Common Resource

A) larger than is socially desirable.
B) smaller than is socially desirable.
C) efficient.
D) indeterminate without more information.

Question

(Figure: Model of a Market for a Common Resource) Use Figure: Model of a Market for a Common Resource.The figure shows the intersection of the private supply and demand curves.Without any consideration of the marginal social cost of using a common resource,the quantity of the common resource used at Q will be: Figure: Model of a Market for a Common Resource

A) larger than is socially desirable.
B) smaller than is socially desirable.
C) efficient.
D) indeterminate without more information.

Conner Clark · Accepted Answer

Final Answer : A, Explanation :  Without considering the marginal social cost, the market will only consider the private cost and private benefit, which means that the quantity used will be determined by the intersection of the private supply and demand curves, which is Q. Since the private cost does not include the cost of using the common resource to society as a whole, the quantity used at Q will be larger than is socially desirable, leading to inefficiency.

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