The efficient quantity of a public good is
A) the quantity produced by private firms.
B) the quantity at which the marginal benefit equals the marginal cost.
C) impossible to determine because each person's marginal benefit is different.
D) the quantity at which the marginal benefit exceeds the marginal cost by as much as possible.
E) the quantity determined by the intersection of the demand curve and the supply curve.

Question

Quizplus · Accepted Answer

The efficient quantity of a public good is the quantity at which the marginal benefit equals the marginal cost. This is because public goods are non-excludable and non-rivalrous, which means that once they are provided, nobody can be excluded from using them, and one person's use of the good does not reduce its availability to others. Therefore, the sum of the marginal benefits that each individual receives from the public good is the total marginal benefit, and the marginal cost is the same for everyone. The goal is to produce the quantity of the public good that maximizes the total surplus between the marginal benefit and the marginal cost, which is achieved when the two are equal.

The Efficient Quantity of a Public Good Is