Use the following to answer question:
Figure: An Individual's Marginal Benefit from a Public Good
-(Figure: An Individual's Marginal Benefit from a Public Good)Use Figure: An Individual's Marginal Benefit from a Public Good.Assume that two individuals will share consumption of a public good;each individual has the marginal benefit curve shown in the figure.If the marginal cost of the good is $24,how many units of the public good will be provided by the private market?
A)0
B)8
C)12
D)16

Question

Use the following to answer question:
Figure: An Individual's Marginal Benefit from a Public Good 
-(Figure: An Individual's Marginal Benefit from a Public Good)Use Figure: An Individual's Marginal Benefit from a Public Good.Assume that two individuals will share consumption of a public good;each individual has the marginal benefit curve shown in the figure.If the marginal cost of the good is $24,how many units of the public good will be provided by the private market?
A)0 
B)8 
C)12 
D)16

Quizplus · Accepted Answer

In a private market, public goods are often underprovided due to the free-rider problem. Since each individual's marginal benefit does not account for the total benefit to all individuals, the market will not supply the good if the cost exceeds the individual marginal benefit. With a marginal cost of $24, which is likely above any single individual's marginal benefit at any quantity, the private market will not provide any units of the public good.

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