This Table Shows the Marginal Benefits from Widgets Obtained by the Only

question 21

Multiple Choice

This table shows the marginal benefits from widgets obtained by the only three people who value them. Suppose widgets cost $8.50 to produce. If widgets are a private good, how many will be produced by market incentives, and is that the right (efficient) number?

• A) Zero will be produced, and this is below the socially optimal amount.
• B) One will be produced, and this is the socially optimal amount.
• C) One will be produced, and this is below the socially optimal amount.
• D) Two will be produced, and this is the socially optimal amount.

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Definitions:

Probability Density Function

A function that describes the relative likelihood for a random variable to take on a given value.

Continuous Random Variable

A type of random variable that can take an infinite number of possible values, often representing measurements on a continuous scale.

Standard Normal Probability Distribution

A type of normal distribution with a mean of 0 and a standard deviation of 1, used in statistics to standardize scores.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, used to indicate the spread of a distribution.