The efficient output level of a public good occurs where the
A)greatest number of free riders occurs.
B)marginal cost of producing the last unit is equal to the marginal benefit realised by consumers.
C)total cost of production is affordable.
D)marginal cost of production is at its lowest.

Question

Quizplus · Accepted Answer

The efficient output level of a public good occurs where the marginal cost of producing the last unit is equal to the marginal benefit realised by consumers. This is because at this level, resources are allocated efficiently and maximise social welfare. The other choices are incorrect as the greatest number of free riders is not a measure of efficiency, total cost of production affordability is not relevant to determining efficiency, and the lowest marginal cost of production may not equate to maximum social welfare.

The Efficient Output Level of a Public Good Occurs Where