What condition must be satisfied for the optimal level of a public good to be provided? Explain the problem of the optimal provision of public goods
What will be an ideal response?
The optimal level of provision of a public good occurs when society's willingness to pay for the additional unit is equal to the marginal cost of producing the good. The problem with the optimal provision of public goods is that it is impossible to know people's preferences and therefore what they are willing to pay.
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A flexible exchange rate regime
A) does not describe the regime follow by the European Central Banks. B) keeps the exchange rate fixed but lets the price of gold fluctuate C) allows a currency to float D) none of these choices.
If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread,
a. more bread will be produced to meet the increased demand b. there will be an excess demand for bread c. the demand for bread will decrease because suppliers will reduce their supply d. an excess supply of bread will emerge e. a $0.50 tax must be imposed to bring equilibrium price into accord with the price ceiling