Assume that Abby, Ben, and Clara are the only citizens in a community. A proposed public good has a total cost of $1000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $400 each to Abby, Ben, and Clara. Based on economic analysis, the public good should:

Question

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Since the total benefits of the public good ($1200) exceed the total cost of producing it ($1000), the public good should be produced. Each citizen will pay $333.33 toward the cost of producing the public good, but each citizen will receive $400 in benefits, resulting in a net gain of $66.67 for each citizen. Therefore, the benefits of the public good exceed the costs of producing it, indicating that it should be produced.

Assume That Abby, Ben, and Clara Are the Only Citizens