Answer the next question on the basis of the following information is for public good.P_a and P_b represent the prices that citizens (a) and (b), the only two people in this nation, are willing to pay for additional units of a quantity (Q_c) of the public good.Q_s represents the quantity of the public good supplied by government at each of the collective prices.In equilibrium, the marginal benefit and cost of the public good will be: A)$7 B)$6 C)$5 D)$3

Question

Quizplus · Accepted Answer

In equilibrium, marginal benefit equals marginal cost. At the quantity supplied where P_a intersects with P_b, the marginal cost of producing one additional unit of the public good is $6, which is also the marginal benefit that citizens (a) and (b) are willing to pay. This is the only point of equilibrium, meaning that the quantity supplied by the government should be Q_s=$8.

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