Suppose that Scott's demand for a public good is P = 7 - 0.3Q and that Mike's demand is P = 10 - 1.5Q.If marginal cost is $14,then the optimal quantity of the public good provided is

Question

Quizplus · Accepted Answer

The optimal quantity is found by setting the marginal cost equal to the sum of the marginal benefits of the two individuals. The marginal benefit of Scott is -0.3 and the marginal benefit of Mike is -1.5. So, the sum of the marginal benefits is -1.8. Setting this equal to the marginal cost of 14, we get Q = 1.67 units.

Suppose That Scott's Demand for a Public Good Is P