The marginal cost of producing 40 units of a public good is $200. There are two individuals in the society. Person A is willing to pay $80 for 40 units of the public good. If 40 units of the public good are provided, how much must Person B be willing to pay?

Question

Rudy Molina

Business

7 June, 13:17

The marginal cost of producing 40 units of a public good is $200. There are two individuals in the society. Person A is willing to pay $80 for 40 units of the public good. If 40 units of the public good are provided, how much must Person B be willing to pay?

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Answers (1)

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Reuben Willis · Answer 1

Person B must be willing to pay $120

Explanation:

Marginal cost = $200

Person A is willing to pay = $80

Marginal cost is the cost which a company incurred for producing one extra unit of goods.

If person A has paid $80, then person B must pay an amount that will cover up for the marginal cost the company incurred.

That mean person B will pay $120,

Meaning; $80 + $120 = $200