Question

When assessing the public welfare, where is the optimal spot for a government to spend on a program?
Responses

where the public benefit is higher than the marginal costs for public goods
where the public benefit is higher than the marginal costs for public goods - no response given

where the marginal costs are the highest for each additional public good
where the marginal costs are the highest for each additional public good - no response given

where the marginal costs exceed the public benefit
where the marginal costs exceed the public benefit - no response given

where the public benefit for public goods intersects with marginal costs

Answer 1

The optimal spot is where the public (marginal) benefit intersects the marginal cost — i.e., when marginal social benefit = marginal cost.

Reason: increasing provision raises net welfare while MB>MC; once MB=MC any further spending would cost more than the extra benefit, reducing welfare. (For public goods use marginal social benefit.)