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 $8, 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 order to determine the quantity of the public good that will be provided by the private market, we need to find the point where the sum of the two individuals' marginal benefit curves equals the marginal cost of the good. From the figure, we can see that at a quantity of 12 units, the vertical sum of the two individual's marginal benefit curves intersects with the marginal cost curve at a value of $8. Therefore, C (12 units) is the quantity that will be provided by the private market.

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