Pam and Kunal are the only members of a community that is trying to determine how much of a public good should be produced. Suppose that Pam is willing to pay $10 for the fourth unit of the public good and that Kunal is willing to pay $6 for the fourth unit. The marginal cost of producing the public good is constant at $4. Which of the following is true?
A) Fewer than four units of the public good should be produced.
B) Exactly four units of the public good should be produced.
C) The Lindahl equilibrium is established when the price of the public good is $10.
D) More than four units of the public good should be produced.
Answers: 3
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