Question 1
If the marginal cost of producing a public good is greater than society's total willingness to pay per unit, then
◦ the optimal amount of the public good is being produced.
◦ less than the optimal amount of the public good is being produced.
◦ more than the optimal amount of the public good is being produced.
◦ the amount of output being produced could be either greater than or less than the optimal amount.
Question 2
Refer to the information given in Table 16.6 below to answer the question that follows.
Refer to Table 16.6. Assume that the marginal cost of hiring a police officer is $100. If A and B are the only two people in the society, the optimal number of police officers is
◦ 1.
◦ 2.
◦ 3.
◦ indeterminate from this information.
Terry Winters, Color and Information.
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