Answer the question on the basis of the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society. Suppose government has already produced 4 units of this public good. The amount individual B is willing voluntarily to pay for the fourth unit is
A) $14.
B) $5.
C) $2.
D) $0.

Question

Answer the question on the basis of the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society. Suppose government has already produced 4 units of this public good. The amount individual B is willing voluntarily to pay for the fourth unit is
A) $14. 
B) $5. 
C) $2. 
D) $0.

Quizplus · Accepted Answer

Since the government has already produced 4 units of the public good, individual B has already paid her willingness to pay ($4) for the first 3 units. Therefore, she is not willing to pay anything extra for the fourth unit, making the answer D ($0) the correct choice.

Answer the Question on the Basis of the Following Information