To determine the efficient quantity of a public good to supply,
A) the private firms that will produce the good each produce the exact same quantity.
B) politicians use the principle of maximum differentiation.
C) total benefit is equated to total cost, the same as is done to determine the efficient quantity of a private good.
D) marginal benefit and marginal cost are equated, the same as is done to determine the efficient quantity of a private good.
E) marginal benefit must exceed marginal cost by as much as possible.

Question

Quizplus · Accepted Answer

The efficient quantity of a public good is determined by equating the marginal benefit to society with the marginal cost of producing the good. This is the same method used to determine the efficient quantity of a private good. Therefore, choice D is the correct answer.

To Determine the Efficient Quantity of a Public Good to Supply