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

Question

Quizplus · Accepted Answer

The efficient quantity is where the marginal social benefit equals the cost. This is because at this point, any additional unit of the public good would cost more than its benefit, leading to a decrease in overall social welfare. Similarly, any reduction in the quantity would result in the loss of social benefits that are more significant than the cost. Therefore, the government should aim to produce the optimal quantity where marginal social benefit equals marginal cost.

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