To Determine the Efficient Quantity of a Public Good to Supply

question 17

Multiple Choice

To determine the efficient quantity of a public good to supply,

• A) the private firms that will produce the good each produce the exact same quantity.
• B) politicians use the principle of maximum differentiation.
• C) total benefit is equated to total cost, the same as is done to determine the efficient quantity of a private good.
• D) marginal benefit and marginal cost are equated, the same as is done to determine the efficient quantity of a private good.
• E) marginal benefit must exceed marginal cost by as much as possible.

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Definitions:

Industry Entry

The process by which new companies or businesses begin to compete in an existing market.

Oligopoly

A market structure characterized by a few companies controlling the majority of market share, which can lead to limited competition.

Perfect Competition

A market structure characterized by many buyers and sellers, homogeneous products, and free entry and exit, leading to an efficient allocation of resources.

Monopoly

A market structure characterized by a single seller controlling a large portion of the market, facing little to no competition.