The diagram below shows the marginal benefit and marginal cost of a public good. This economy has 3 individuals, A, B and C. The diagram shows the MB for each individual and a summation of their marginal benefits.
FIGURE 16- 4
-Refer to Figure 16- 4. Suppose the government provides Q4 units of the public good. If consumers were then required to pay a price of P1 ,
A) the inefficient quantity would be being produced.
B) consumers would not use the public good at all, and this would be socially optimal.
C) the appropriate price would be achieved, although not enough would be consumed.
D) the market would clear, although not enough would be produced.
E) consumers would use too little of the public good, and the outcome would be inefficient for society.
Correct Answer:
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