Join Our Discord

Learn Moreย ย ๐Ÿ‘‡

caret down
caret up
discord-logo

Join our Discord

1,000s of Fiveable Community students are already finding study help, meeting new friends, and sharing tons of opportunities among other students around the world! Don't miss out!ย  ๐ŸŽ‰

group of students
group of students

๐Ÿ’ตย ap micro

ย ย >ย ย 

๐Ÿ›ย Unit 6

ย ย โ€ขย ย โฑ๏ธ2 min read

6.1 Socially Efficient and Inefficient Market Outcomes

jeanne stansak

โฑ๏ธ November 15, 2020

๐Ÿ“…

Unit 6: Market Failure and the Role of Government

6.1: Socially Efficient and Inefficient Market Outcomes

Socially efficient market outcomes are the optimal distribution of all resources in society while taking into account all internal and external costs and benefits. In our study of economics, socially efficient takes place where marginal social benefit (MSB) = marginal social cost (MSC).

https://firebasestorage.googleapis.com/v0/b/fiveable-92889.appspot.com/o/images%2F-sAQdqYpAelIs.png?alt=media&token=97fc91ec-909c-4668-a435-ac2cd12e52f8

Marginal Social Benefit (MSB) is the additional benefit received by all members of society due to the consumption of an additional unit of a good or service. This includes both those who directly benefit from consuming the foods, and those who receive spillover benefits, or external benefits experienced by third parties, from consumption.

Marginal Social Cost (MSC) is the additional cost incurred by all members of society due to the consumption of an additional unit of a good or service. This includes both the private cost paid by the producers along with spillover costs, which are external costs faced by third parties.

When you are producing at the quantity and price level where MSB = MSC, you are producing at the socially efficient point. At this point, we maximize all economic surplus. If you choose a quantity on either side of the equilibrium quantity, you are producing an inefficient quantity, and it will result in deadweight loss.

In the graph above, if we were to produce either at a quantity above or below the equilibrium, we would be producing at an inefficient point where we are either underproducing or overproducing the good or service. The government sometimes has to take action or make policies to correct these inefficiencies.

A tent in the woods with a fire

Get your ap micro survival pack!

Download our ap micro survival pack and get access to every resource you need to get a 5.

ap micro study guides

๐Ÿ’ธย  Unit 1: Basic Economic Concepts

continue learning

Slide 1 of 6
Fiveable

Join Our Discord

discord-logo

Fiveable Community students are already meeting new friends, starting study groups, and sharing tons of opportunities for other high schoolers. Soon the Fiveable Community will be on a totally new platform where you can share, save, and organize your learning links and lead study groups among other students!๐ŸŽ‰

*apยฎ and advanced placementยฎ are registered trademarks of the college board, which was not involved in the production of, and does not endorse, this product.

ยฉ fiveable 2021 | all rights reserved.

2550 north lake drive
suite 2
milwaukee, wi 53211