Suppose a public good is provided in an economy with only two consumers, Popeye and Captain Hook. If Popeye values the public good at $4,000 per year, and Captain Hook values it at $3,000 per year, the economy's marginal benefit of the public good per year is
A) $4,000.
B) $1,000.
C) $7,000.
D) $3,000.
E) $12,000.

Question

Quizplus · Accepted Answer

The marginal benefit of a public good in an economy is the sum of the valuations of all consumers because public goods are non-excludable and non-rivalrous, meaning everyone can benefit from them simultaneously without diminishing the benefit to any single consumer. Therefore, adding Popeye's valuation of $4,000 and Captain Hook's valuation of $3,000 gives a total marginal benefit of $7,000 per year.

Suppose a Public Good Is Provided in an Economy with Only