What Is Marginal Private Cost?

Private marginal cost refers to the marginal cost that a producer (consumer) must bear for producing (consuming) an item.

Private marginal cost

Right!

Private marginal cost refers to the marginal cost that a producer (consumer) must bear for producing (consuming) an item.

Chinese name

Private marginal cost

Foreign name

Marginal private cost

Use

Private marginal cost

Object

Producer and consumer private

Field

Microeconomics

Use of private marginal cost

(1) In the absence of externalities, the sum of the private marginal costs paid by producers and consumers is the social marginal cost, namely:

Private Marginal Cost (Producer Marginal Cost and Consumer Marginal Cost) = Social Marginal Cost

(2) In the presence of externalities, it is assumed that the production of one more item by producer A will lead to external diseconomy effects and degrade the production environment of another producer B. In order to offset the impact of this deterioration, maintaining the original output Producer B must add a certain cost, which is the so-called external marginal cost. The sum of private marginal cost and external marginal cost is A's social marginal cost of producing one more item. At this time, the private marginal cost is inconsistent with the social marginal cost.