Chapter 10, Problem 14P

To determine

Concept Introduction:

Marginal Cost (MC): It refers to the rate by which the total cost of the produced good changes when the production increases by a single unit. As fixed cost is constant irrespective of production, so the marginal cost depends on the variable cost only in the short run.

Here,

• is the marginal cost.
  
• is the change in total cost
  
• is the change in quantity.
  

Marginal social cost: 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.

Rival and Non-rival goods: If a good or service consumed by a person alone at a time and its consumption is prevented from the other persons at that point of time then this kind of good is known as a rival good,
If a good or service consumed by a person alone and its consumption is not prevented from the other persons at that point of time, then this kind of good is known as a non-rival good. Generally, private goods are treated as rival goods and public goods are treated as non-rival goods.

Excludable and Non-Excludable goods: If people are prevented from the use of the good they have not paid for, then such goods are treated as excludable goods, whereas if people cannot be prevented from the use of the good they have not paid for, then such goods are treated as non-excludable goods.

Marginal social benefit: The increased benefit for the society by any of the activity of an individual or firm is known as a marginal social benefit, it is calculated by summing up marginal external benefit and marginal private benefit.

Individual Marginal benefit: The increased benefit for an individual by any of the activity of an individual or firm is known as the individual marginal benefit.