The following information is for a public good.P_a and P_b are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.The collective willingness of this society to pay for the 2^nd unit of this public good is: A)$2 B)$4 C)$6 D)$8

Question

Quizplus · Accepted Answer

To find the collective willingness to pay for the 2nd unit of the public good, we add up the individual willingness to pay for that unit, which is P_a + P_b = $6 + $6 = $12. However, we only need to account for the price of the last unit of the public good that individuals are willing to pay for before they do without it, which is P_a = $6. Therefore, the best choice is C, $6.

The Following Information Is for a Public Good