When Choosing the Right Amount of a Public Good to Supply,the

question 100

Multiple Choice

When choosing the right amount of a public good to supply,the government:

• A)often guesses,because people have an incentive to overstate a good's value.
• B)often provides too much,because people have an incentive to understate a good's value.
• C)often provides too little,because people have an incentive to overstate a good's value.
• D)often fails to provide it,because people have an incentive to understate a good's value.

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Definitions:

Average Total Cost

The cost for each unit produced, found by taking the total cost of producing goods and dividing it by the output quantity.

Production Function

An equation that describes the maximum amount of output that can be derived from a set number of inputs.

Diminishing Marginal Product

The principle that says the marginal product of a factor of production decreases as the quantity of the factor is increased, holding all else constant.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the scale of production and the cost per unit of production decrease.