If the government is supplying a public good,the efficient quantity is where:
A)the marginal social benefit equals the cost.
B)the total social benefit equals the cost.
C)the marginal social benefit is greater than the cost.
D)the total social benefit outweighs the total cost.

Question

Quizplus · Accepted Answer

The efficient quantity for a public good is where the marginal social benefit (MSB) is equal to the marginal cost (MC) of providing it. This is because the MSB represents the additional benefit to society of one more unit of the public good while the MC represents the cost of producing that additional unit. When MSB is equal to MC, society is getting the maximum net benefit from the public good. Therefore, the correct choice is A, where marginal social benefit equals the cost.

If the Government Is Supplying a Public Good,the Efficient Quantity