Optimal Provision for Private Goods    Optimal provision or allocatively efficient provision of any good is the same. Efficiency requires that the added utility of the last unit equal the added cost of provision, or MC = MU.

   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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