The optimal output of a public good occurs where
A)The total cost of the good equals the cumulated benefits of all consumers
B)The sum of the marginal benefit of each consumer at a given output equals the marginal cost of the good
C)The marginal benefit of the consumer who values the good most should equal the marginal cost of the good
D)The horizontal sum of the consumer benefits of the good should equal the marginal cost of producing the good

Question

Quizplus · Accepted Answer

The optimal output of a public good occurs where the sum of the marginal benefit of each consumer at a given output equals the marginal cost of the good. This is because this is the point where the most benefits are being received by consumers without the cost of producing the good exceeding the benefits. Option B describes this situation.

The Optimal Output of a Public Good Occurs Where