Pareto Efficiency Condition (MSC = MSB)
A good's production level is Pareto efficient if, and only if, its marginal social cost (MSC) equals its marginal social benefit (MSB). [1, 2, 7] At this equilibrium, it is impossible to improve overall societal welfare by changing the quantity. If output were increased by one unit, the cost incurred by society would be greater than the value it provides. Conversely, if production were reduced by one unit, the loss in societal benefits would outweigh the cost savings.
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