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 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. Marginal social benefit: 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 the market activity by the private firm or individual who led to a negative externality or harm to any third person or third party, it is generally kept same as the social cost and it is laid to correct the inefficient outcome of the market.

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Chapter 17, Problem 7P

To determine

Concept introduction:

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 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.

Marginal social benefit: 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 the market activity by the private firm or individual who led to a negative externality or harm to any third person or third party, it is generally kept same as the social cost and it is laid to correct the inefficient outcome of the market.

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