Asked by Shelby Buckler on May 28, 2024
Verified
Esteban, Mariko, and Greta are the only three people in a community. Esteban is willing to pay $20 for the fifth unit of a public good; Mariko, $15; and Greta, $25. Government should produce the fifth unit of the public good if the marginal cost is less than or equal to
A) $25.
B) $15.
C) $60.
D) $20.
Marginal Cost
The financial outlay required to produce one more unit of a product or service.
Public Good
A good that is non-excludable and non-rivalrous, meaning it can be used by many people without depleting its availability to others.
- Investigate the prerequisites for effective distribution of public goods, focusing on the aggregate eagerness to remunerate.
Verified Answer
RG
Riddhi GohelMay 29, 2024
Final Answer :
C
Explanation :
The marginal benefit of producing the fifth unit of a public good is the sum of the willingness to pay of all three individuals (Esteban: $20, Mariko: $15, Greta: $25), which totals $60. The government should produce the fifth unit if the marginal cost is less than or equal to this total marginal benefit of $60.
Learning Objectives
- Investigate the prerequisites for effective distribution of public goods, focusing on the aggregate eagerness to remunerate.