9781118041581

constructing additional miles of highway. The figure also presents demand

curves for highway trips for two distinct groups: commercial users (business

trucks, vans, and the like) and noncommercial users (“ordinary’’ drivers).

Each demand curve measures the marginal benefit for the group from the

greater number of trips (and greater convenience) afforded by extra miles

of highway.

472 Chapter 11 Regulation, Public Goods, and Benefit-Cost Analysis

Marginal Values and Costs (Millions of Dollars)

Total marginal benefit:

MBc + MBn

Highway’s

optimal size

(17.5 miles)

Marginal cost of

highway expansion

Marginal benefit to

Marginal commercial users

benefit to

noncommercial

users

Highway Length (Miles)

10 Q*

Q

20 30 40

$4.00

3.00

2.75

2.00

1.75

1.00

0

FIGURE 11.3

Optimal Output of a

Pure Public Good

A highway of optimal

length (17.5 miles)

equates the total

marginal benefit of

users to the marginal

cost of construction.

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