Because public goods exhibit non-rivalness in consumption the Marginal Utility of the last unit provided is the sum of the Marginal Utilities obtained by everyone. The Marginal Utility of a private good is the marginal utility obtained by a single consumer, measured by market price. Optimal provision for public goods means MC = Sum of MU and for private goods MC = P. This is illustrated to the right. The allocatively efficient amount QAEis where the marginal cost of production equals the Sum of the Marginal Utilities.
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