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.If the marginal cost of the good is $24, how much of the public good will be provided by the private market?
A)0 units
B)8 units
C)12 units
D)16 units

Question

Quizplus · Accepted Answer

In the case of public goods, the private market often fails to provide the efficient quantity because individuals can benefit without paying (free-rider problem). If the marginal cost is $24 and individuals have the same marginal benefit curve, the private market will not provide any units since individuals will not voluntarily pay for the good.

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