Scenario: Ben and Nick Two individuals, Ben and Nick, are the only members of a hypothetical community.They have revealed the marginal private benefits they each receive from a public good whose marginal social benefit is known.In addition, the marginal social cost (MSC) of the public good is known and is constant. (Scenario: Ben and Nick) Refer to the information and figure in the scenario Ben and Nick.Q4:
A)is the socially optimal level of public good provision.
B)is equal to P₄ + P₃ in marginal social benefits.
C)represents an amount at which the MSB is greater than the MSC.
D)will not be produced, since neither Ben nor Nick finds benefit in it at this level.

Question

Scenario: Ben and Nick Two individuals, Ben and Nick, are the only members of a hypothetical community.They have revealed the marginal private benefits they each receive from a public good whose marginal social benefit is known.In addition, the marginal social cost (MSC) of the public good is known and is constant.   (Scenario: Ben and Nick) Refer to the information and figure in the scenario Ben and Nick.Q4:
A)is the socially optimal level of public good provision. 
B)is equal to P₄ + P₃ in marginal social benefits. 
C)represents an amount at which the MSB is greater than the MSC. 
D)will not be produced, since neither Ben nor Nick finds benefit in it at this level.

Quizplus · Accepted Answer

The socially optimal level of public good provision is where the MSB equals the MSC. In the given figure, this point is at Q4, which is the intersection of the MSC curve and the MSB curve. Therefore, the socially optimal level of public good provision is Q4.

Scenario: Ben and Nick Two Individuals, Ben and Nick, Are