Efficiency Review
Private vs. Social Costs and Benefits
Marginal Private Benefit (MPB) The benefit to the **buyer** from consuming one more unit. This is the **demand curve**.
Marginal Private Cost (MPC) The cost to the **seller** from producing one more unit. This is the **supply curve**.
Marginal Social Benefit (MSB) The total benefit to **society** from one more unit:
Marginal Social Cost (MSC) The total cost to **society** from one more unit:
When Is the Market Efficient?
When Does Market Failure Occur?
Negative Externality (Overproduction)
Negative externality: market overproduces — DWL from units between Qsocial and Qmarket
Positive Externality (Underproduction)
Positive externality: market underproduces — DWL from units not produced between Qmarket and Qsocial
Total Surplus Analysis
The Role of Government
AP Exam Tips
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Common Mistakes
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