If the marginal cost of producing a public good is less than society's total willingness to pay per unit, then
A) the optimal amount of the public good is being produced.
B) less than the optimal amount of the public good is being produced.
C) more than the optimal amount of the public good is being produced.
D) the amount of output being produced could be either greater than or less than the optimal amount.

Question

Quizplus · Accepted Answer

When the marginal cost of producing a public good is less than society's total willingness to pay per unit, it indicates that producing additional units of the good would provide more benefit to society than it costs to produce. Therefore, less than the optimal amount of the public good is being produced, as increasing production would increase overall welfare until the marginal cost equals the total willingness to pay.

If the Marginal Cost of Producing a Public Good Is