AP MicroeconomicsMarket Failure & Government
Marginal Social Cost
Marginal social cost is the total cost to society of producing one more unit, equal to private costs plus external costs.
It equals the marginal private cost plus the marginal external cost. With a negative externality, the marginal social cost curve lies above the supply (marginal private cost) curve. The socially efficient quantity occurs where marginal social cost equals marginal social benefit.
Formula / Example
MSC = Marginal Private Cost + Marginal External Cost.
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