📚 Learning Guide
Marginal Analysis and Social Optimality
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Marginal analysis is to allocative efficiency as social optimality is to what?

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Learning Path
Learning Path

Question & Answer
1
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2
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3
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4
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Choose the Best Answer

A

Market equilibrium

B

Total cost

C

Social welfare maximization

D

Consumer surplus

Understanding the Answer

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Answer

Marginal analysis is a method used to evaluate the additional benefits and costs of a decision, helping to achieve allocative efficiency, which means resources are used where they are most valued. Similarly, social optimality refers to a situation where resources are distributed in a way that maximizes overall societal welfare. This can be understood as the point where the total benefits to society from a good or service equal the total costs of producing it. For example, if a community decides to build a park, social optimality occurs when the enjoyment and health benefits to the community from the park match the costs of building and maintaining it. In both cases, the goal is to ensure that resources are used effectively to benefit society as a whole.

Detailed Explanation

Social optimality means the best outcome for everyone in society. Other options are incorrect because Market equilibrium is when supply meets demand; Total cost is just the sum of all expenses.

Key Concepts

Marginal Analysis
Social Optimality
Allocative Efficiency
Topic

Marginal Analysis and Social Optimality

Difficulty

medium level question

Cognitive Level

understand

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