Question

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?

Answer 1

Answer:

$120

Explanation:

Yes Person B must be willing to pay an amount that would cover the marginal cost of the product.

Remember, the marginal cost is the cost per unit of a product not the sales cost. Therefore, the total value paid should cover the marginal cost.

Answer 2

Answer:

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