Asked by Jeanette Retana on May 06, 2024
Verified
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.
Marginal Cost
The money required to produce another unit of a product or service.
Public Good
A benefit of goods or services, free of charge to everyone in society, provided by public authorities or private organizations or individuals, without seeking financial gain.
- Illuminate the concept concerning the supreme level of allocation for public benefits.
Verified Answer
AA
Andreu AlegreMay 12, 2024
Final Answer :
B
Explanation :
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.
Learning Objectives
- Illuminate the concept concerning the supreme level of allocation for public benefits.
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