-Suppose two individuals, Pooh and Piglet, desire protection (provided by Tigger) for their community, The Hundred Acre Wood, from heffalumps. Protection is a public good. The marginal cost of protection as well as Piglet's and Pooh's marginal benefits from protection are in the table above. What is the quantity of protection that achieves the maximum net benefit?
A) 1 hour per day
B) 2 hours per day
C) 3 hours per day
D) 4 hours per day

Question

-Suppose two individuals, Pooh and Piglet, desire protection (provided by Tigger) for their community, The Hundred Acre Wood, from heffalumps. Protection is a public good. The marginal cost of protection as well as Piglet's and Pooh's marginal benefits from protection are in the table above. What is the quantity of protection that achieves the maximum net benefit?
A) 1 hour per day 
B) 2 hours per day 
C) 3 hours per day 
D) 4 hours per day

Quizplus · Accepted Answer

The maximum net benefit is achieved when the sum of the marginal benefits equals the marginal cost. At 3 hours per day, the combined marginal benefits of Pooh and Piglet equal the marginal cost of protection.

-Suppose Two Individuals, Pooh and Piglet, Desire Protection (Provided by Tigger)