Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C. If the good shown on the graphs is a public good, and the marginal cost of providing each unit is constant and equal to $5, then what is the optimal quantity of the public good?

Question

Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C.  If the good shown on the graphs is a public good, and the marginal cost of providing each unit is constant and equal to $5, then what is the optimal quantity of the public good?

Quizplus · Accepted Answer

The optimal quantity of a public good occurs where the marginal benefit of the public good equals its marginal cost. The marginal benefit of the 40ᵗʰ unit is $5 ($2 for A + $1 for B + $2 for C), which is equal to the marginal cost of the public good.

Suppose the Market Consists of 3 Individuals: Citizen A, Citizen