To Determine the Efficient Quantity of a Public Good to Supply

question 118

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

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials and labor costs.

Overapplied

A situation in cost accounting where the allocated overhead costs exceed the actual overhead costs.

Finished Goods Inventory

The stock of completed products that are ready to be sold.

Underapplied

Describes the situation where the allocated manufacturing overhead is less than the actual manufacturing overhead incurred.