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. The curve MBABC is derived by
A) observation of the consumption of public goods at a price of zero.
B) observation of the consumption of public goods at the optimal price.
C) a horizontal summation of the marginal benefits of all individuals at each given price level.
D) determining the private marginal cost of the public good.
E) a vertical summation of the marginal benefits of all individuals at each level of output.
Correct Answer:
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