Suppose Good a Is a Public Good

question 34

Multiple Choice

Suppose good A is a public good.The marginal cost of providing 5 units of this good is $300.The marginal benefit derived from the consumption of 5 units by 3 individuals X,Y,and Z are $75,$125,and $100 respectively.Assuming that X,Y,and Z are the only consumers of good A,which of the following will hold true?

• A)Good A will be overproduced in the economy.
• B)Good A will be underproduced in the economy.
• C)Producing 5 units of A is efficient.
• D)More than 5 units of good A must be produced to make the outcome efficient.

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