The table below shows the marginal benefit that arises from providing police protection in an economy of two people. Police protection is a public good.
Q (cars on duty) Paul's marginal benefit ($ per car) Art's marginal benefit ($ per car)
1 50 90
2 40 75
3 30 60
4 20 45
5 10 30
The marginal social benefit from having the 3rd police car on duty is ________.
The town should provide ______ police cars if the marginal cost is $90.
Please explain, thank you
The marginal social benefit of a third police car is $90. Therefore, if the marginal cost is $90, the town should provide three police cars.
To understand these answers, we first have to understand how to determine the marginal social benefit of a public good. Remember that consumption of a public good is non-rivalrous. This means that one person’s use of the good does not prevent another person from using it. Therefore, both Paul and Art can benefit from the police car at the same time. Because they can both benefit, we find the marginal social benefit by adding together their respective marginal benefits. That gives us a marginal social benefit of $90 for the third police car.
In order to be efficient, a government has to provide the amount of services where the marginal cost is equal to the marginal benefit. In this case, we are told that the marginal cost is $90. Therefore, the town should provide the number of police cars where the marginal benefit is $90. We have seen that the marginal social benefit of the third police car is $90, which means that the town should provide three cars.
Thanks! Could you explain another question to me?
1.Obtaining a college degree has a marginal external benefit. The figure below shows the market for college education.
The deadweight loss is ________________ billion dollars.
If the government wants to bring the market to the efficient level, how much of the tuition should be subsidized by the government?
For the deadweight loss, I got 6 billion dollars but i'm not sure and I have no idea what the second question is asking.