The marginal cost of producing 25 units of a public good is $100. There are two individuals in the society. Person A is willing to pay $40 for 25 units of the public good. If 25 units of the public good are provided, then Person B must be willing to pay
A) $0.
B) $40.
C) $60.
D) $75.

Question

Quizplus · Accepted Answer

The marginal cost of producing 25 units is $100. Since public goods are non-excludable and their costs are shared, the combined willingness to pay by Person A and Person B must equal the marginal cost. Person A is willing to pay $40, so Person B must be willing to pay $60 ($100 - $40) to cover the total cost of $100.

The Marginal Cost of Producing 25 Units of a Public