Stability of the Marginal Social Cost Curve under Quasi-Linearity
In models with quasi-linear preferences, because the Marginal External Cost (MEC) is independent of wealth, the Marginal Social Cost (MSC) curve does not shift when income is redistributed between parties, for example, through compensatory payments. This stability is crucial for graphical analysis, as it allows for the identification of a single, unique Pareto-efficient level of output, which corresponds to the intersection of the stable MSC curve and the marginal social benefit curve (or price).
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Stability of the Marginal Social Cost Curve under Quasi-Linearity