Economics: Marginal Costs and Benefits (Essay Sample)

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Economics: Marginal Costs and Benefits


Social Benefit refers to the total benefit accrued from producing a certain good or service, as well as the consumption of the same. Social benefit is the summation of all the private and external benefit from positive externalities. If the external benefits are many, the social benefits will be more than the private benefits. Externalities are either costs or benefits that are incurred by those who are not involved in the production of certain goods and services.
Marginal Social Benefit (MSB) refers to the total benefits accruing to the individual private company as well as the society as a whole from positive externalities.
MSB = MPB + MB External
=500+400
MSB= $ 900.
Therefore, both the society and the daycare will enjoy a total of $900 as marginal benefits.
b) The ideal figure of students in this day care will, therefore, be 140 students. This is the optimum figure of students in the institution since they account for the total benefits enjoyed by both the private organization and the society as a whole.
c) Social costs refer to the total costs accruing to the society as a result of producing a certain good or service by a firm. Private costs refer to those costs accruing to private firms as a result of producing goods or services. External costs refer to those ...