Chapter 3, Problem 1DQ

To determine

Whether it is possible to be too safe and the meaning of "too safe."

Explanation of Solution

When the marginal social cost of safety exceeds the marginal social benefit then the condition is referred to as "too safe." It can be explained with the help of a case where the government bans cars to eliminate deaths caused by car accidents.

In this case, the deaths due to car accidents can be curbed but the collapse of the auto industry and resulting unemployment would have far more serious economic and eventually societal effects.

So at times being "too safe" means that the costs associated with being safe are overwhelmed by the societal consequences of those actions.

Economics Concept Introduction

Concept introduction:

Marginal social benefit:

An increased benefit to the society by any activity of an individual or a firm is known as marginal social benefit. It is calculated by adding the marginal external benefit to the marginal private benefit.

Marginal social cost:

An increased cost to the society by any activity of an individual or a firm is called marginal social cost. It is calculated by adding the marginal external cost to the marginal private cost.