Sue and Mark are the only two members of a community.Sue's marginal benefit from one lighthouse is $2,000 and Mark's marginal benefit is $1,000.If the marginal cost of one lighthouse is $2,500 and if a lighthouse is a public good,then for efficiency the lighthouse should
A) be built but only Sue should be allowed to use it.
B) be built but only Mark should be allowed to use it.
C) be built and both Sue and Mark should be allowed to use it.
D) not be built because its marginal cost exceeds Sue's marginal benefit.
E) not be built because its marginal cost exceeds both Sue's and Mark's marginal benefit.

Question

Quizplus · Accepted Answer

Since the marginal benefit of building the lighthouse exceeds the marginal cost, it should be built. As a public good, it should be available to both Sue and Mark for efficiency. Therefore, choice C is the best option.

Sue and Mark Are the Only Two Members of a Community.Sue's