If you and I both reside in the same town, there will be the same quantity of fireworks for both of us
during the local fireworks show. My marginal rate of substitution between pyrotechnics and ham
sandwiches does not have to be the same as yours to be efficient. Instead, efficiency dictates that the
sum of what viewers are ready to pay for a marginal increase in the number of pyrotechnics equals the
marginal cost of fireworks. This means that the sum of the absolute values of viewers' marginal rates of
substitution between fireworks and private goods must equal the marginal cost of public goods in terms
of private goods. The town will spend a total of $10 million upgrading its skating rink. Then there's the
tax bill, which is paid by an individual citizen to cover the costs of the project.
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