The optimal level of provision of public goods is where society total willingness to pay per unit is equal to the ?
Correct answer: C. marginal cost of producing the good
- A. variable cost of producing the good
- B. average cost of producing the good
- C. marginal cost of producing the good
- D. total cost of producing the good
Explanation
Because everyone can consume a public good, society's marginal benefit is found by vertically adding individuals' willingness to pay per unit. Efficient provision occurs where this total marginal benefit equals the marginal cost of production.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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