Which of the following best describes the marginal social benefit (MSB) curve shown in the graph?

• A. It illustrates the marginal private cost of producing one more unit of a good.
• B. It indicates the equilibrium price and quantity in a perfectly competitive market.
• C. It represents the additional benefit to society from consuming one more unit of a good.
• D. It shows the total benefit to society from all units consumed.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of Marginal Social Benefit (MSB). MSB represents the additional benefit to society from consuming one more unit of a good, combining both private benefits to consumers and any external benefits to others.
2. Step 2: Differentiate MSB from Marginal Private Cost (MPC). MPC refers to the cost incurred by producers for producing one more unit, which is different from the benefit side represented by MSB.
3. Step 3: Recognize that equilibrium price and quantity in a perfectly competitive market are determined where Marginal Private Cost equals Marginal Private Benefit, not directly by the MSB curve.
4. Step 4: Distinguish between marginal and total benefits. MSB is a marginal concept (benefit from one additional unit), whereas total benefit sums benefits from all units consumed.
5. Step 5: Conclude that the MSB curve best describes the additional benefit to society from consuming one more unit of a good, which aligns with the correct answer choice.