Which of the following best describes how the demand curve for a public good is derived?

• A. By selecting the highest individual demand curve among all consumers
• B. By averaging the individual demand curves of all consumers
• C. By horizontally summing the individual demand curves of all consumers
• D. By vertically summing the individual demand curves of all consumers

Answer: (D)

Verified step by step guidance

1. Understand that a public good is non-rivalrous and non-excludable, meaning one person's consumption does not reduce availability for others.
2. Recall that for private goods, market demand is found by horizontally summing individual demand curves because consumers buy different quantities at each price.
3. Recognize that for public goods, the quantity consumed is the same for all consumers, so we sum their willingness to pay (valuations) at each quantity level.
4. This summation of willingness to pay is done vertically, meaning at each quantity, we add up the prices (or marginal benefits) that each consumer is willing to pay.
5. Therefore, the demand curve for a public good is derived by vertically summing the individual demand curves, reflecting the total willingness to pay for each quantity.