Marginal Social Cost (MSC): The increased cost for the society by any of the activity of an individual or firm is known as marginal social cost. It is calculated by summing up marginal external cost and marginal private cost. Marginal Social Benefit (MSB): The increased benefit for the society by any of the activity of an individual or firm is known as marginal social benefit. It is calculated by summing up marginal external benefit and marginal private benefit. Pigouvian tax: This tax is laid on that market activity by the private firm or individual which led to a negative externality or harm to any third person or third party, it is generally set equal to the social cost and it is laid to correct the inefficient outcome of the market.

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Chapter 10, Problem 13P

To determine

Concept Introduction:

Marginal Social Cost (MSC): The increased cost for the society by any of the activity of an individual or firm is known as marginal social cost. It is calculated by summing up marginal external cost and marginal private cost.

Marginal Social Benefit (MSB): The increased benefit for the society by any of the activity of an individual or firm is known as marginal social benefit. It is calculated by summing up marginal external benefit and marginal private benefit.

Pigouvian tax: This tax is laid on that market activity by the private firm or individual which led to a negative externality or harm to any third person or third party, it is generally set equal to the social cost and it is laid to correct the inefficient outcome of the market.

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