Asked by Apiwe Xozwa on Jun 19, 2024
Verified
The marginal cost of producing 40 units of a public good is $200. There are two individuals in the society. Person A is willing to pay $80 for 40 units of the public good. If 40 units of the public good are provided, how much must Person B be willing to pay?
A) $0
B) $80
C) $120
D) $150
Marginal Cost
The rise in cost resulting from the manufacture of an additional unit of a product or service.
Public Good
A product or service that is non-excludable and non-rivalrous, meaning that one's use of the good does not reduce its availability to others.
- Elucidate the principle of the optimal provision level for public goods.
Verified Answer
FS
Fabiana StanzaniJun 22, 2024
Final Answer :
C
Explanation :
The total cost of producing 40 units is $200. Person A is willing to pay $80, so Person B must be willing to pay the remaining amount to cover the total cost, which is $200 - $80 = $120.
Learning Objectives
- Elucidate the principle of the optimal provision level for public goods.
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