The efficient output of a public good is determined at the point where:
A)the average revenue curve intersects the marginal cost curve.
B)the total benefit curve is at its maximum.
C)the social marginal benefit curve intersects the marginal cost curve.
D)the social total cost curve intersects the social benefit curve.

Question

Quizplus · Accepted Answer

The efficient output of a public good is determined by the intersection of the social marginal benefit curve and the marginal cost curve. This is because the social marginal benefit curve reflects the combined value that all members of society place on an additional unit of the public good, while the marginal cost curve reflects the cost of providing that unit. At the point where these two curves intersect, society achieves the optimal balance between the benefits of producing more of the public good and the costs of doing so.

The Efficient Output of a Public Good Is Determined at the Point