Having a hard time anwering all the questions, need some help. Consider the mark

Question

Having a hard time anwering all the questions, need some help.

Consider the market for wood from a forest. Suppose the trees are a common resource. Assume the supply curve represents the private cost of production and the demand curve represents the private benefit from consumption. Explain how the private market overuses common resources. First, the private market equilibrium quantity is that quantity where the OA. O B. O c. marginal social cost curve intersects the marginal private benefit curve marginal social cost curve intersects the marginal private cost curve marginal private cost curve intersects the merginal social benefit curve D. marginal private benefit curve intersects the marginal private cost curve For a common resource, O A. the marginal soclal cost curve is below the marginal private cost curve. O B. the marginal soclal benefit curve is above the marginal private benefit curve. O C. the marginal social cost curve is above the marginal private cost curve. O D. the marginal social benefit curve is below the marginal private beneflt curve. The optimal market quantity is that quantity where the OA marginal social cost curve intersects the marginal private benefit curve O B. marginal social cost curve intersects the marginal private cost curve. OC. marginal private cost curve intersects the marginal social benefit curve O D. marginal private benefit curve intersects the marginal private cost curve.

Explanation / Answer

PART 1

In a private market, equilibrium quantity is that quantity corresponding to which the marginal private benefit curve intersects the marginal private cost curve.

Hence, the correct answer is the option (D).

PART 2

In case of common resource, over utilization is common.

The reason behind over utilization of common resource is that the marginal social cost is greater than the marginal private cost.

As marginal private cost is less than the marginal social cost, quantity extracted by private producers is greater than the socially optimal quantity leading to over utilization of common resource.

So, for a common resource, the marginal social cost curve is above the marginal private cost curve.

Hence, the correct answer is the option (C).

PART 3

The optimal market quantity is that quantity corresponding to which marginal social cost curve intersects the marginal private benefit curve.

Hence, the correct answer is the option (A).

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