What is the socially optimal quantity?

The socially optimal quantity refers to the level of production and consumption that results in the greatest overall economic surplus, which is the total benefits to society minus the total costs. This concept is rooted in welfare economics, where the goal is to achieve an allocation of resources that leads to the maximization of societal welfare.

When determining the socially optimal quantity, economists analyze both the benefits and the costs of producing a good. This includes considering externalities, which are costs or benefits incurred by third parties who are not directly involved in the transactions of the good. The socially optimal quantity will account for these externalities, ensuring that the full social costs and benefits are included in the decision-making process.

In contrast, the quantity that maximizes corporate profits focuses solely on the interests of the firm without regard to broader societal impacts, making it less relevant for considering societal welfare. The production under perfect competition refers to a market structure that can lead to efficient outcomes, but it does not necessarily guarantee the social optimum unless it aligns with externalities. Lastly, the quantity sold at equilibrium price simply reflects the point where supply equals demand, which does not inherently ensure the maximum economic surplus or consider external costs and benefits.

Therefore, the choice that correctly identifies the socially optimal quantity is the one