In the context of market equilibrium, how does the concept of marginal benefit relate to welfare economics when determining the optimal allocation of resources?

In market equilibrium, the concept of marginal benefit is important because it helps us understand how much value people get from consuming one more unit of a good or service. Welfare economics looks at how resources can be allocated in a way that maximizes overall happiness or satisfaction for society. When the marginal benefit of a good equals its marginal cost, it indicates that resources are being used efficiently, meaning that the benefits to consumers match the costs of producing the good. For example, if a person is willing to pay $10 for an extra slice of pizza but the cost to produce that slice is only $5, the marginal benefit exceeds the marginal cost, suggesting that resources are well allocated. Thus, balancing marginal benefits and costs leads to better decisions about how to distribute resources for the greatest good.