Answer the next question on the basis of the following information is for public good.P_a and P_b represent the prices that citizens (a) and (b) ,the only two people in this nation,are willing to pay for additional units of a quantity (Q_c) of the public good.Q_s represents the quantity of the public good supplied by government at each of the collective prices.
Refer to the information below.If the collective willingness to pay for an additional unit of this public good is $6,then the collective quantity demanded will be:

Question

Answer the next question on the basis of the following information is for public good.P<sub>a</sub> and P<sub>b</sub> represent the prices that citizens (a) and (b) ,the only two people in this nation,are willing to pay for additional units of a quantity (Q<sub>c</sub>) of the public good.Q<sub>s</sub> represents the quantity of the public good supplied by government at each of the collective prices. Refer to the information below.If the collective willingness to pay for an additional unit of this public good is $6,then the collective quantity demanded will be: A) 1 unit and the socially optimal quantity supplied will be 5 units. B) 2 units and the socially optimal quantity supplied will be 4 units. C) 3 units and the socially optimal quantity supplied will be 3 units. D) 4 units and the socially optimal quantity supplied will be 2 units.

Quizplus · Accepted Answer

At a price of $6, the quantity demanded by citizen (a) is 3 units (P_a = $6) and the quantity demanded by citizen (b) is also 3 units (P_b = $6). The collective quantity demanded is 6 units (3 + 3). At a price of $6, the government will supply 3 units of the public good (Q_c = 3). The socially optimal quantity is where the marginal cost equals the marginal benefit, which is at 3 units. Therefore, the socially optimal quantity supplied is also 3 units, which matches the quantity demanded at a price of $6.

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