The efficient output level of a public good occurs where the
A)greatest number of free riders occurs.
B)marginal cost of producing the last unit is equal to the marginal benefit realized by consumers.
C)total cost of production is affordable.
D)marginal cost of production is minimized.

Question

Quizplus · Accepted Answer

The efficient output level of a public good occurs where the marginal cost of producing the last unit is equal to the marginal benefit realized by the consumers. This ensures that both the society and the producer are maximizing their benefits and costs. Choice A is incorrect as the greatest number of free riders indicate a suboptimal situation. Choice C is incorrect as total cost is not the only consideration in determining the efficient output level. Choice D is incorrect because minimizing marginal cost may not necessarily result in the efficient output level, as the marginal benefit also needs to be taken into account.

The Efficient Output Level of a Public Good Occurs Where