Answer the question on the basis of the following information for a public good.P_a and P_b 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. $\begin{array}{c}\begin{array}{c}\underline{\text {Q }}\\1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\underline{\mathrm{Pa}_{\mathrm{a}} }\\\$ \\2\\1\\0\\0\end{array}\begin{array}{c}\underline{\mathrm{Pa}_{\mathrm{b}} }\\\$ 5 \\4 \\3 \\2 \\1\end{array}\end{array}$
Refer to the data.If the marginal cost of producing this good at the optimal quantity is $4,the optimal quantity must be:

Question

Answer the question on the basis of the following information for a public good.P_a and P_b 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.

\begin{array}{c}\begin{array}{c}\underline{\text {Q }}\\1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\underline{\mathrm{Pa}_{\mathrm{a}} }\\\$ \\2\\1\\0\\0\end{array}\begin{array}{c}\underline{\mathrm{Pa}_{\mathrm{b}} }\\\$ 5 \\4 \\3 \\2 \\1\end{array}\end{array}

Refer to the data.If the marginal cost of producing this good at the optimal quantity is $4,the optimal quantity must be:

Quizplus · Accepted Answer

The optimal quantity of a public good is where the marginal cost of producing the good is equal to the sum of the marginal willingness to pay of all individuals who value the good. In this case, the marginal cost is $4. At a quantity of 3, the marginal willingness to pay of individual A is $1 and the marginal willingness to pay of individual B is $3. This adds up to $4, which is equal to the marginal cost. Therefore, the optimal quantity is 3 units.

Answer the Question on the Basis of the Following Information