The graph shows costs and benefits of a mosquito control program, which is a public good:
a) What is the quantity of spraying that achieves efficiency?
b) What is the political equilibrium if voters are well informed?
a) Efficiency is reached at the quantity where marginal social benefit equals marginal social cost, i.e. at 5 square miles per day.
b) If voters are well informed, the political equilibrium will be the efficient quantity of spraying, 5 square miles per day.
You might also like to view...
Total cost equals total variable cost plus marginal cost
a. True b. False Indicate whether the statement is true or false
Answer the following questions true (T) or false (F)
1. When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit. 2. A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market. 3. If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.