The right and efficient amount of a public good will be produced when:
A)the government follows the rule of MR = MB.
B)the government applies the rule of MB = MC.
C)the government makes the highest level of profit from producing it.
D)the government can exclude the payers from non-payers.

Question

Quizplus · Accepted Answer

The rule MB = MC (marginal benefit equals marginal cost) ensures that the efficient amount of the public good is being produced. This means that the marginal benefit to society of producing one more unit of the public good is equal to the marginal cost to society of producing that unit. It ensures that the society is getting the maximum benefit from the public good without overproducing and wasting resources.

The Right and Efficient Amount of a Public Good Will