Why is society's marginal social benefit curve for a public good found by vertically summing individual marginal benefit curves and not by horizontal summation as is the case for private goods?
What will be an ideal response?
In the case of a private good, producers must supply one different item to all individuals who demand one; that is, if 10,000 pizzas are demanded, 10,000 must be produced. Horizontal summation tells how much in total is demanded at a certain price. Because public goods are nonrival, producers need only supply one unit in total to all individuals who demand one. Vertical summation tells how much society is willing to pay for each unit produced.
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In the above figure, what is the magnitude of the marginal rate of substitution (MRS) at point a?
A) 1/2 B) the rate at which the consumer will give up magazines to purchase more CDs while preferring the new combination to the old C) 2 D) The question cannot be answered without more information.
Why doesn't the age-earning cycle continuously increase until retirement age?
What will be an ideal response?