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) marginal benefit and marginal cost are equated, the same as is done to determine the efficient quantity of a private good.
C) total benefit is equated to total cost, the same as is done to determine the efficient quantity of a private good.
D) politicians use the principle of maximum differentiation.
E) marginal benefit must exceed marginal cost by as much as possible.

Question

Quizplus · Accepted Answer

To determine the efficient quantity of a public good to supply, marginal benefit and marginal cost are equated, the same as is done to determine the efficient quantity of a private good. This is because the efficient quantity is where the marginal benefit of the last unit provided equals its marginal cost, leading to the greatest overall benefit to society.

To Determine the Efficient Quantity of a Public Good to Supply