-Paul and Paula are the only members of society.The table above gives their marginal benefits from missile gunboats,a public good.Suppose the marginal cost of a missile gunboat is $8 million.What is the efficient quantity of missile gunboats?
A) 1 boat
B) 2 boats
C) 3 boats
D) 4 boats
E) More information about whether the services provided by missile gunboats are rival or not is needed.

Question

-Paul and Paula are the only members of society.The table above gives their marginal benefits from missile gunboats,a public good.Suppose the marginal cost of a missile gunboat is $8 million.What is the efficient quantity of missile gunboats?
A) 1 boat 
B) 2 boats 
C) 3 boats 
D) 4 boats 
E) More information about whether the services provided by missile gunboats are rival or not is needed.

Quizplus · Accepted Answer

The efficient quantity of a public good is found where the sum of the marginal benefits (MB) of all individuals equals the marginal cost (MC) of providing the good. In this case, adding Paul's and Paula's marginal benefits for each additional boat, the sum equals the marginal cost of $8 million at 3 boats.

-Paul and Paula Are the Only Members of Society