-Tom and Jerry are the only members of society. The table above shows their marginal benefits from defence satellites, a public good. If the marginal social cost of a satellite is $54, the quantity of satellites provided by a competitive market is
A) 0.
B) 1.
C) 2.
D) 3.

Question

-Tom and Jerry are the only members of society. The table above shows their marginal benefits from defence satellites, a public good. If the marginal social cost of a satellite is $54, the quantity of satellites provided by a competitive market is
A) 0. 
B) 1. 
C) 2. 
D) 3.

Quizplus · Accepted Answer

In a competitive market, public goods like defense satellites are often underprovided due to the free-rider problem. Since the marginal social cost ($54) is not covered by either Tom or Jerry's willingness to pay at any quantity (as their combined marginal benefits never reach $54), the market would not provide any satellites.

-Tom and Jerry Are the Only Members of Society