Suppose the marginal cost of the fourth unit of a public good is $20.If Mark and Judy are the only members of society,and they are willing to pay $10 and $11,respectively,for the fourth unit of the good,then the efficient quantity is
A) 3 units.
B) 4 or more units.
C) 0 units.
D) More information is needed about the marginal benefits of the first, second, and third units of the public good.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The efficient quantity of a public good is determined by summing the marginal willingness to pay of all individuals and comparing it to the marginal cost. Here, Mark and Judy are willing to pay $10 and $11 respectively for the fourth unit, summing to $21, which is greater than the marginal cost of $20. This indicates that producing the fourth unit is efficient, hence the answer is 4 or more units.

Suppose the Marginal Cost of the Fourth Unit of a Public