-Paul and Paula Are the Only Members of Society

question 179

Multiple Choice

-Paul and Paula are the only members of society.The table above gives their marginal benefits from missile gunboats,a public good.Suppose the marginal cost of a missile gunboat is $8 million.What is the efficient quantity of missile gunboats?

• A) 1 boat
• B) 2 boats
• C) 3 boats
• D) 4 boats
• E) More information about whether the services provided by missile gunboats are rival or not is needed.

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Definitions:

Cost of Debt

The effective rate that a company pays on its current debt, which can include loans, bonds, and any other interest-bearing liabilities.

Market Risk Premium

The extra return expected by investors for holding a risky market portfolio instead of risk-free assets, reflecting the additional risk.

Dividend

The payment made by a corporation to an equity investor (stockholder).

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often used in capital budgeting to evaluate potential investments.