Long run marginal cost is always zero, and long run average cost is a downward-sloping hyperbola. Adam Smith's Lighthouse 3 Notice that the marginal cost curve and the demand curve intersect at Q, and despite the special conditions of the lighthouse, this is the efficient rate of use of the lighthouse' services. We draw two conclusions. 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. The cost of the good is indivisible, so that its marginal cost is zero Most economists would include in this category the traditional governmental services, such as defense and the maintenance of law and order.
Some economists find many other examples of public goods in a modern economy.
There is a good deal of controversy on this. However, public goods like the lighthouse really are very special cases. As these examples may suggest, a some quasipublic goods arguably are best provided by government, but not all, and there is a debatable boundary between the two. That point can be generalized somewhat. When some people bear costs that they are not paid for, these costs are said to be external costs .