Figure: An Individual's Marginal Benefit from a Public Good (Figure: An Individual's Marginal Benefit from a Public Good) Look at the figure An Individual's Marginal Benefit from a Public Good.Assume that two individuals will share consumption of a public good; each individual has the same marginal benefit curve as the one shown in the figure.What is the total social benefit from four units of the public good?
A)$16
B)$60
C)$144
D)$200

Question

Figure: An Individual's Marginal Benefit from a Public Good   (Figure: An Individual's Marginal Benefit from a Public Good) Look at the figure An Individual's Marginal Benefit from a Public Good.Assume that two individuals will share consumption of a public good; each individual has the same marginal benefit curve as the one shown in the figure.What is the total social benefit from four units of the public good?
A)$16 
B)$60 
C)$144 
D)$200

Quizplus · Accepted Answer

To determine the total social benefit from four units of the public good, we need to add up the marginal benefits of each of the two individuals at the quantity of four. From the graph, we can see that at a quantity of four, individual A has a marginal benefit of $8, and individual B has a marginal benefit of $6. Therefore, the total social benefit at a quantity of four is $8 + $6 = $14. Since there are four units, the total social benefit from four units of the public good is $14 x 4 = $56. However, we need to double this amount since there are two individuals sharing the consumption. Therefore, the total social benefit from four units of the public good is $56 x 2 = $112. Finally, we need to add the total cost of producing the four units, which is $32 (4 units x $8). Thus, the total social benefit from four units of the public good is $112 + $32 = $144.

Figure: an Individual's Marginal Benefit from a Public Good