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 the 20ᵗʰ unit is $10, then the optimal quantity of the public good is:

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 the 20ᵗʰ unit is $10, then the optimal quantity of the public good is:

Quizplus · Accepted Answer

The marginal benefit of the 20ᵗʰ unit is $13 ($4 for A + $3 for B + $6 for C). Since this is greater than the marginal cost of the 20ᵗʰ unit, the optimal quantity of the public good is greater than 20.

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