(Figure: An Individual's Marginal Benefit from a Public Good) Use Figure: An Individual's Marginal Benefit from a Public Good.Assume that two individuals will share consumption of a public good;each individual has the marginal benefit curve shown in the figure.If the marginal cost of the good is $24,what is the total benefit of the level of the public good that maximizes society's welfare?

A) $0
B) $24
C) $124
D) $248

Question

Amanda Heinle · Accepted Answer

Final Answer : D, Explanation :  The total benefit at the welfare-maximizing level of a public good is found by adding the individual marginal benefits at the point where the combined marginal benefit equals the marginal cost. If the marginal cost is $24, we find the quantity where the sum of the individuals' marginal benefits equals $24. Since both individuals have the same marginal benefit curve and the public good is shared, we double the quantity found on one curve to get the total quantity. The total benefit is the area under the marginal benefit curve up to this quantity, which, according to the given options, is $248. This implies that the combined area under the two individuals' marginal benefit curves up to the welfare-maximizing quantity equals $248.

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