Question

What condition must be met in order to conclude that an economy is maximizing social well-being? Do the equilibriums given by individual markets necessarily lead to the maximization of social well-being (that is, if demand is equal to supply, can you conclude that well-being is maximized)? Explain why/why not making sure to discuss marginal social benefits and costs, marginal private benefits and costs, and demand and supply.

Answer 1

equilibrium = marginal private cost = marginal private benefit

maximizing well being = marginal social cost = marginal social benefit