Profit-Maximizing Output in the Weevokil Banana Market
In the Weevokil banana production example, the market is competitive with a world price of $400 per ton, which is considered the marginal social benefit of growing bananas. To maximize profits, plantation owners select an output level where their marginal private cost (MPC) equals this market price. As illustrated at Point A in the corresponding diagram, this profit-maximizing output is 80,000 tons. However, this production level is Pareto-inefficient because it disregards the external costs of pollution imposed on the fishing industry. [3, 5]
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Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
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