How do you get socially optimal?
Answer: To find the socially optimal amount of the good we need to set the market demand curve equal to the marginal cost curve. Here we assume that both the demand curve and the marginal cost curve include all the benefits and all the costs, respectively, that society faces with this good.
What is socially optimal quantity?
The socially optimal quantity of pol- lution is the quantity of pollution that society would choose if all the costs and benefits of pollution were fully accounted for.
What is the socially optimal point in economics?
The point on the utility possibility frontier that maximizes social welfare. The social optimum is the allocation chosen by a benevolent social planner who is constrained only by the endowment of resources.
What is socially optimal in Monopoly?
A Socially Optimal Price is a price where the monopoly reaches allocative efficiency (DARP=MC). Since a price ceiling that low would cause some monopolies to incur an economic loss, a Fair Return Price is a viable alternative. The Fair Return Price is found where price equals Average Total Cost (DARP=ATC).
Where is socially optimal equilibrium?
The socially optimal equilibrium according to the graph will be the point where the SMC or the Social Marginal Cost will be equal to the demand curve D that also works as the Social marginal Benefit or SMB here.
What is the socially optimal level of crime?
A socially optimal level of crime is something policy makers have long thought about. To answer this question multi dimensionally, it is critical to explore “optimal” from numerous perspectives. From a purely theoretical lenses, optimality means maximizing the surplus involved in criminal acts.
Is market equilibrium socially optimal?
Explain the difference between market equilibrium and social optimum. ANSWER: Market equilibrium is when demand is equal to supply; social optimum is when marginal social benefit is equal to marginal social cost.
What is the socially optimal price to the consumer?
The socially optimal price to charge a person for any good is the marginal cost of providing the good to that person. The marginal cost of having an extra person enter a National Park is zero (as long as the park isn't overcrowded, in which case we'd have an externality).
What is the socially optimal quantity of pollution?
From an economic persepctive the socially optimal level of pollution occurs when the marginal benefit of the last unit of pollution exactly equals the marginal cost of pollution. At this level the net benefits to society are maximized.
How do you calculate optimal quantity?
Also referred to as 'optimum lot size,' the economic order quantity, or EOQ, is a calculation designed to find the optimal order quantity for businesses to minimize logistics costs, warehousing space, stockouts, and overstock costs. The formula is: EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.
How do you calculate socially efficient quantity?
The socially efficient quantity of lift tickets can be found by setting MSB = inverse supply curve, since there are no (net) marginal external costs. Thus 80 – (1/5)Q = (1/6)Q yielding Q = 218.18, or approximately 218.
What is the socially optimal quantity of steel production?
2 tonsWhat is the socially optimal quantity of steel production? The socially optimal level of steel production is 2 tons.
Overview
The socially optimal firm size is the size for a company in a given industry at a given time which results in the lowest production costs per unit of output.
Discussion
If only diseconomies of scale existed, then the long-run average cost-minimizing firm size would be one worker, producing the minimal possible level of output. However, economies of scale also apply, which state that large firms can have lower per-unit costs due to buying at bulk discounts (components, insurance, real estate, advertising, etc.) and can also limit competition by buying out competitors, setting proprietary industry standards (like Microsoft Windows), etc. If only these "ec…
Variation in optimal firm size by industry
The "diseconomies of scale" do not tend to vary widely by industry, but "economies of scale" do. An auto maker has very high fixed costs, which are lower per unit of output the more output is produced. On the other hand, a florist has very low fixed costs and hence very limited sources of economies of scale. Thus there are disparate degrees of economies of scales for different types of organizations.
Effects of agricultural, industrial, and service-based economies on optimal firm size
An industrial society will tend to have large firms, as industry has substantial economies of scale. A service-based economy will favor smaller firms, as services have limited economies of scale. There will, of course, be exceptions, such as Microsoft, which is a huge services company.
Effect of free entry on firm size
If the market for a product exhibits free entry, meaning that firms can enter (and exit) the market at will with no logistical, legal, or other inhibiting factors, and if firms have U-shaped long-run average cost curves as in the graphs at the right, then in the long run all firms will end up producing at their point of minimum average cost. For suppose a particular firm with the illustrated long-run averag…
See also
• Diseconomies of scale
• Economies of scale
• Minimum efficient scale