(Scenario: Avery and Ethan and the Demand for a Public Good) UseScenario: Avery and Ethan and the Demand for a Public Good. In thefigure, Q4:
Avery and Ethan are the only members of a community. They haverevealed the marginal private benefits they each receive from apublic good whose marginal social benefit is known. In addition,the marginal social cost (MSC) of the public good is knownand is constant.
Scenario Avery And Ethan And The Demand For A Public Good Use Scenario Avery And Ethan And The Demand For A Public G 1 (18.22 KiB) Viewed 41 times
represents an amount at which the MSB isgreater than the MSC.
is equalto P4 + P3 inmarginal social benefits.
will not be produced, since neither Avery nor Ethan finds anybenefit in it at this level.
is the socially optimal level of provision of the publicgood.
Marginal benefit of public good P₁ P₂ P3 P₁ Q₁₂ Q₂ Avery's MB Ethan's MB Q3 Q4 Q₁ MSC MSB Quantity
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