The following information is 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.The collective willingness of this society to pay for the 2^nd unit of this public good is:

Question

Quizplus · Accepted Answer

The collective willingness to pay for the last unit of the public good is the sum of individual willingness to pay, which is P_a + P_b = $6 + $6 = $12. Since the cost of providing the public good is less than the collective willingness to pay, it is socially optimal to provide the public good. Therefore, the best choice would be to provide the public good at a cost lower than the collective willingness to pay, which is $6. Any option lower than $6 would be socially efficient, but any option higher than $6 would be inefficient. Thus, option C ($6) is the best choice.

The Following Information Is for a Public Good