Theoretically, the market demand for a public good is found by
A) vertically adding the MEC and MPC functions
B) overcoming free-ridership and vertically summing the price responses for each quantity
C) adding horizontally the marginal benefits received by each consumer at every price level
D) summing the quantities each person is willing and able to buy at each and every price

Question

Quizplus · Accepted Answer

The market demand for a public good is found by vertically summing the price responses for each quantity, after overcoming free-ridership. This is because in the case of public goods, the consumption by one individual does not reduce its availability for others, and hence, there is a problem of free-ridership. Therefore, the demand for a public good is obtained by aggregating the willingness to pay of all individuals at different price levels to determine the overall demand for the good.

Theoretically, the Market Demand for a Public Good Is Found