Suppose in a country there are only two persons.Person A is willing to pay $50 to have one unit of a public good produced;person B is willing to pay $60 to have one unit of a public good produced and $50 to have two units produced.A point on the country's marginal social benefit curve for this public good is a price of ________ and quantity demanded of ________.
A)$50;1 unit
B)$60;1 unit
C)$110;2 units
D)$110;1 unit
E)$55;1 unit

Question

Quizplus · Accepted Answer

The marginal social benefit curve is the vertical summation of the individual demand curves. At a quantity of one unit, person A's willingness to pay is $50 and person B's willingness to pay is $60. Therefore, the marginal social benefit at this quantity is $110. The price of the public good is equal to the marginal social benefit, so the answer is $110 for 1 unit.

Suppose in a Country There Are Only Two Persons