Alex, Kara, and Susie are the only three people in a community. Alex is willing to pay $20 for the fifth unit of a public good; Kara, $15; and Susie, $5. Government should produce the fifth unit of the public good if the marginal cost is less than or equal to

Question

Quizplus · Accepted Answer

The marginal benefit of producing the fifth unit of a public good is the sum of the willingness to pay of all three individuals (Alex $20, Kara $15, Susie $5), which totals $40. Therefore, the government should produce the fifth unit if the marginal cost is less than or equal to $40.

Alex, Kara, and Susie Are the Only Three People in a Community