For a private good, the economy's marginal social benefit curve is the ________ sum of the individual marginal benefit curves and for a public good, the economy's marginal social benefit curve is the ________ sum of the individual marginal benefit curves.

Question

Quizplus · Accepted Answer

For a private good, the economy's marginal social benefit curve is simply the sum of the individual marginal benefit curves because private goods are rivalrous and excludable, so one person's consumption reduces the amount available for others and individuals can be excluded from consuming the good. Therefore, the individual's marginal benefit is also the marginal social benefit. The sum of the individual's marginal benefits yields the marginal social benefit.

For a public good, the economy's marginal social benefit curve is the horizontal sum of individual marginal benefit curves because public goods are non-rivalrous and non-excludable. This means that one person's consumption does not reduce the amount available for others, and no one can be excluded from consuming the good. As a result, the marginal benefit of each individual's consumption is not affected by the consumption of others, and the marginal social benefit is simply the sum of individual marginal benefits at each level of consumption.

For a Private Good, the Economy's Marginal Social Benefit Curve