Scenario: Ben and Nick Two individuals, Ben and Nick, are the only members of a

Question

Scenario: Ben and Nick
Two individuals, Ben and Nick, are the only members of a hypothetical community. They have revealed the marginal private benefits they each receive from a public good whose marginal social benefit is known. In addition, the marginal social cost (MSC) of the public good is also known and is constant.

a. the MSC is less than the MSB. b. Ben places a higher value on the public good than Nick. c. private marginal benefits cannot be determined. d. the optimal level is not attained.

Explanation / Answer

b) Ben places a higher value on the public good than Nick. We can see that the MB curve of Ben is higher at all points of Q, so he values the good more. a) It cannot be , if we go beyond Q4, the MSC will be more than the MSB C) Private marginal benefit can be determined. D) Optimal level is achied when MSB= MSC, that is at Q4 We can see that the MB curve of Ben is higher at all points of Q, so he values the good more. a) It cannot be , if we go beyond Q4, the MSC will be more than the MSB C) Private marginal benefit can be determined. D) Optimal level is achied when MSB= MSC, that is at Q4

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