If the marginal social benefit of a public good increases, what happens to the efficient quantity?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $25.99Unlock all

Prepare for the AP Microeconomics exam on Market Failure and the Role of Government with detailed quizzes featuring multiple-choice questions, hints, and explanations. Master your understanding and ace the test!

Multiple Choice

If the marginal social benefit of a public good increases, what happens to the efficient quantity?

Explanation:
The efficient provision of a public good occurs where the marginal social benefit from one more unit equals the marginal social cost. If the marginal social benefit rises, the social value of an extra unit is higher at every quantity, so the point where MSB equals MSC moves to a larger quantity. In other words, a higher MSB makes more of the good socially worthwhile, so the efficient quantity increases.

The efficient provision of a public good occurs where the marginal social benefit from one more unit equals the marginal social cost. If the marginal social benefit rises, the social value of an extra unit is higher at every quantity, so the point where MSB equals MSC moves to a larger quantity. In other words, a higher MSB makes more of the good socially worthwhile, so the efficient quantity increases.

More Multiple Choice Questions
Subscribe

Get the latest from Passetra

You can unsubscribe at any time. Read our privacy policy