AP MicroeconomicsMarket Failure & Government
Marginal Social Benefit
Marginal social benefit is the total benefit to society from consuming one more unit, equal to private benefits plus external benefits.
It equals the marginal private benefit plus the marginal external benefit. With a positive externality, the marginal social benefit curve lies above the demand curve. The socially efficient quantity occurs where marginal social benefit equals marginal social cost.
Formula / Example
MSB = Marginal Private Benefit + Marginal External Benefit.
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