The Lighthouse 3

Notice that the marginal cost curve and the marginal benefit curve intersect at Q, where the marginal benefit curve touches the horizontal axis. That's because the marginal cost is always zero. This is the efficient rate of use of the lighthouse' services. When the marginal cost is zero, it is efficient to use the service to the point where the marginal benefit is also zero. This corresponds to a price of zero. That is, the lighthouse is used and priced efficiently when it is provided for free. This can only be true when the marginal cost of the good is zero, of course.

We draw two conclusions.

1. Since it is impractical to try to charge the ships for the use of the lighthouse, there is no good alternative to government provision of lighthouses.
2. If the government does provide lighthouses without charge, they will in fact be used at the efficient rate where the marginal benefit equals the marginal cost -- zero.

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