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Question & Answer
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The increased enjoyment of the park by families and individuals, plus the improved neighborhood aesthetics.
The initial cost of constructing the park.
The taxes collected from local businesses.
The potential rise in property values due to the park.
Understanding the Answer
Let's break down why this is correct
The MSB is the extra gain for society when a new park appears. Other options are incorrect because The cost to build the park is a private expense, not a benefit; Taxes are a revenue tool, not a benefit to society.
Key Concepts
Externalities and Social Optimum
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Deep Dive: Externalities and Social Optimum
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Definition
Externalities occur when the marginal social benefit or cost of a good differs from the private benefit or cost. The socially optimal output level accounts for externalities, aiming to align production with maximum social welfare by considering all costs and benefits. Understanding externalities is crucial to address market inefficiencies and achieve overall welfare maximization.
Topic Definition
Externalities occur when the marginal social benefit or cost of a good differs from the private benefit or cost. The socially optimal output level accounts for externalities, aiming to align production with maximum social welfare by considering all costs and benefits. Understanding externalities is crucial to address market inefficiencies and achieve overall welfare maximization.
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