Figure 16-2 The Optimal Provision of a Public Good
How much of a public good should the government provide? It should
provide the public good up to the point at which the sum of everyone’s
individual marginal benefit from the good is just equal to the marginal
cost of providing the good. We add everyone’s individual marginal
benefit to get the total marginal benefit because a public good—unlike an
ordinary private good—can be used simultaneously by everyone. It
therefore generates value to more than one person at a time. Figure 16-
2 shows the optimal provision of a public good in the simple case of
only two individuals.
The optimal quantity of a public good is such that the marginal cost of the good equals the
sum of all users’ marginal benefit of the good.Determining the optimal provision of a public good requires adding
together the marginal benefits for each individual. The figure shows
marginal benefit curves for a public good for two individuals, Andrew and
Brenda. Since both can consume the good simultaneously, society’s
marginal benefit of the good is the sum of their own marginal benefits. By