Suppose the marginal cost of the fourth unit of a public good is $20. If Mark and Judy are the only members of society, and they are willing to pay $10 and $11, respectively, for the fourth unit of the good, then the efficient quantity is
A) 4 or more units.
B) zero units.
C) 3 units.
D) More information is needed about the marginal benefits of the first, second and third units of the public good.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The efficient quantity is 4 or more units because the sum of what Mark and Judy are willing to pay ($10 + $11 = $21) exceeds the marginal cost of the fourth unit ($20), indicating that the societal benefit of producing the fourth unit exceeds its cost.

Suppose the Marginal Cost of the Fourth Unit of a Public