Question

One hundred of the voters in a town are willing to pay $100 each to support a public green space, which will cost $10,000 to build and maintain. One hundred and fifty voters in the same town do not value the public green space. What is the social marginal benefit of the public green space

Answer 1

Answer:

Social Marginal Benefit = 10000

Net Social Marginal Benefit = 0

Explanation:

For Public Goods, Marginal benefit to each consumer is reflected within their willingness to pay for the public good.

Marginal Benefit (Willingness to pay) = 100 for 100 people, 0 for 150 people

So, Marginal Benefit = (100) (100) + (150) (0)

= 10,000

Marginal Cost of the public good space = 10000 [Given]

Net Social Marginal Benefit = Marginal Benefit - Marginal Cost

= 10,000 - 10,000

= 0