Final answer:
The efficiency condition involves equating the ratio of the marginal utilities of public good G and private good X to the ratio of their prices. The amount of public goods produced will be determined by the utility-maximizing point on the consumption budget constraint. Myopic behavior could lead to underinvestment in public goods.
Step-by-step explanation:
The question asks about the efficiency condition and the amount of public good that will be produced, given the utility function of economic agents. To determine the efficiency condition, we reference the general rule that states the ratio of the prices of two goods should be equal to the ratio of the marginal utilities of those goods. In a scenario where 1 unit of private good X is needed to produce 1 unit of public good G, the efficiency condition will involve setting the marginal utility of G over the cost to produce it (1 unit of X) equal to the marginal utility of X over its cost.
The amount of public goods produced depends on the utility-maximizing choice under a consumption budget constraint. This can be found by using the ratio of marginal utility to price for goods 1 and 2 and ensuring they are equal at the optimal choice. If agents are myopic, they may not account for the broader benefits of public goods and thus could underinvest in G, leading to a suboptimal level of public goods provision.