Socially Optimal Quantity
Definition
The socially optimal quantity is the level of production or consumption that maximizes overall societal welfare or utility.
Analogy
Imagine a buffet where everyone can take as much food as they want. The socially optimal quantity would be when each person takes an amount of food that satisfies them without wasting too much, ensuring that everyone gets enough to eat and minimizing food waste.
Related terms
Marginal Social Benefit (MSB): Marginal social benefit refers to the additional benefit society gains from consuming one more unit of a good or service.
Marginal Social Cost (MSC): Marginal social cost refers to the additional cost imposed on society from producing one more unit of a good or service.
Deadweight Loss: Deadweight loss represents the inefficiency in resource allocation caused by market distortions such as taxes or monopolies. It occurs when there is a reduction in consumer surplus and producer surplus due to market failure.
"Socially Optimal Quantity" appears in:
Additional resources (1)
Practice Questions (3)
In a negative externality, the socially optimal quantity occurs when?
What happens to the socially optimal quantity when a per-unit subsidy is provided for a good with a positive externality?
A company make nuclear reactive products, when left without regulation they dump nuclear waste into river. What is being described, and how does the quantity produced in the market compare to the socially optimal quantity?
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