ACCA Advanced Performance Management (APM) 2025 – 400 Free Practice Questions to Pass the Exam

To understand why the quantity at which marginal private cost equals marginal private benefit is important, consider that this intersection represents the optimal level of production and consumption in a market. When marginal private cost (the cost borne by producers) is equal to marginal private benefit (the benefit gained by consumers), it indicates that resources are being allocated efficiently, and the overall welfare of society is maximized.

In this scenario, the chosen quantity suggests that at 30 units, the additional costs of producing one more unit (marginal private cost) are exactly balanced by the additional benefits obtained from consuming that unit (marginal private benefit). This situation signifies the point where neither producers nor consumers have an incentive to alter their behavior — no producer would want to produce less since the costs align with the benefits, and no consumer would want to consume more because the satisfaction derived from an additional unit would not outweigh the cost of production.

The other quantities do not fulfill this condition, as they either imply that the costs exceed the benefits or the benefits exceed the costs, leading to a misallocation of resources and resulting inefficiencies. Therefore, identifying 30 as the quantity where marginal private cost meets marginal private benefit is essential for promoting optimal economic efficiency.