Asked by Agnes Arzumanyan on May 05, 2024
Verified
Assume there are two people in a society. Person A is willing to pay $140 to have one unit of a public good produced and Person B is willing to pay $160 to have one unit of a public good produced and $140 to have two units produced. As a result, society would be willing to pay a price of ________ of this public good.
A) $300 for 1 unit
B) $200 for 3 units
C) $200 for 1 unit
D) $160 for 5 units
Public Good
Services or products are given freely to all members of society, supplied by either public institutions or private sectors, with no intention to profit.
Willingness To Pay
The maximum amount an individual is prepared to spend on a good or service, indicating the value they derive from the item.
- Understand the significance of willingness to pay in the context of public goods.
Verified Answer
TK
Tyler KinchenMay 11, 2024
Final Answer :
A
Explanation :
For one unit of the public good, Person A is willing to pay $140 and Person B is willing to pay $160, totaling $300. Public goods are non-rivalrous and non-excludable, so the total willingness to pay is the sum of each individual's willingness to pay.
Learning Objectives
- Understand the significance of willingness to pay in the context of public goods.