Sue and Mark are the only two members of a community. Sue's marginal benefit from one lighthouse is $2,000 and Mark's marginal benefit is $1,000. If the marginal cost of one lighthouse is $2,500 and if a lighthouse is a public good, then for efficiency the lighthouse should
A) be built, but only Sue should be allowed to use it.
B) be built, but only Mark should be allowed to use it.
C) not be built because its marginal cost exceeds Sue's marginal benefit.
D) not be built because its marginal cost exceeds both Sue's and Mark's marginal benefit.
E) be built and both Sue and Mark should be allowed to use it.

Question

Quizplus · Accepted Answer

The lighthouse should be built and both Sue and Mark should be allowed to use it because the total marginal benefit of the lighthouse exceeds the marginal cost, making it efficient to produce. Even though Mark's benefit is less than Sue's, it still adds to the overall benefit of the community. Since the lighthouse is a public good, it should be available for all members of the community to use.

Sue and Mark Are the Only Two Members of a Community