Question:
Which of the following is true of the marginal cost providing a pure public good to one more consumer?
(1) It is positive.
(2) It is equal to zero.
(3) It is equal to the initial cost of production of the good.
(4) It decreases as the number of consumers decrease.
(5) It increases as the number of consumers decrease.
Correct Answer:
(2)
Answer Explanation:
A defining characteristic of a pure public good is “non-rivalry.” This means that once the good is produced (like a lighthouse or national defense), an additional person consuming it does not diminish anyone else’s use, nor does it cost the provider any extra resources. Thus, the marginal cost of an additional user is zero.
Topic: Public Goods Year: 2018
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