Apple ACPT Certification Exam 9L0-402

This can be illustrated with a diagram. Profit-maximizing organizations will set output at Qp where marginal private costs (MPC) is equal to marginal revenue (MR). (This diagram 9L0-402 assumes perfect competition, under which price (P) equals MR.) This will yield a profit shown by the triangular area 0,C,F.

But if externalities are present, the attainment of social optimality requires that the full Testking 9L0-509 social costs must be considered. The socially optimum level of output is Qs where marginal social costs (MSC) is equal to marginal revenue (MR). The amount of output, Qp minus Qs, indicates the excess output due to the externality. Profits will decrease also, 9L0-509 from 0,C,F to 0,A,F. It is clearly profitable for the firm to pollute, since "internalizing the externality" hurts profits. The amount of the externality will decrease from C,D to B,A.

Because the marginal social cost curve (MSC) is above the marginal private cost curve (MPC), this diagram illustrates the case of a negative externality. If the marginal social cost Pass4sure 9L0-402 curve was below the marginal private cost curve, it would be a positive externality and social optimality would require a greater output than Qp rather than a reduction of output.