Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000th gallon?

the private cost of the 10,000th gallon is $2.25

Explanation:

The computation of the private cost is shown below:

Private marginal cost is

= Social marginal cost - External cost

= $3.5 - $1.25

= $2.25

hence, the private cost of the 10,000th gallon is $2.25

We simply applied the above formula so that the correct value could come

And, the same is to be considered