Question

What is difficult about using cost-benefit analysis to estimate the level of a public good that will maximize social welfare? It is difficult to estimate the marginal costs of supplying a public good. The government cannot use cost-benefit analysis to estimate this. It is difficult to estimate the marginal social benefits of supplying a public good. The costs of using it may make the provision of the public good prohibitive.

Answer 1

It is difficult to estimate the marginal social benefits of supplying a public good.

Step-by-step explanation:

A public good will always be beneficial to the society. However, the exact social benefits it brings cannot be exactly (quantitatively) measured. The costs behind the creation of such a good can be measured (e.g. How much of funding is needed to build a hospital in a village?).

On the other hand, the marginal social benefit for each unit of resources invested cannot be identified (e.g. How many people would benefit for a million dollars invested?).