In producing the efficient amount of a public good,government should take into account:
A) only the demand from high-demand consumers.
B) only the demand from low-demand consumers.
C) the vertical sum of all individual inverse demand curves.
D) the horizontal sum of all individual inverse demand curves.

Question

Quizplus · Accepted Answer

In order to produce the efficient amount of a public good, the government should take into account the vertical sum of all individual inverse demand curves. This involves adding up the total willingness to pay for the public good by all consumers, regardless of their level of demand. By considering the vertical sum, the government can ensure that the public good is provided at the optimal level that maximizes social welfare. It is important to take into account the demand of all consumers, not just high or low-demand ones, in order to achieve an efficient outcome. The horizontal sum of all individual inverse demand curves would not provide an accurate representation of total demand for the public good.

In Producing the Efficient Amount of a Public Good,government Should