Microeconomics - Chapter 17

Public Goods & Common Resources

characteristics of goods

excludable, nonexcludable, rival, and nonrival

def of excludable & example

people who don’t pay can be easily prevented from using a good. ex: jeans

def of rival & ex

the same unit of the good cannot be consumed by more than one person at a time (or at all). ex: cheeseburger

def of nonexcludable & ex

people who don’t pay CANNOT be easily prevented from using a good. ex: national defense

def of nonrival & ex

more than one person can consume the same unit of the good at the same time. ex: digital music

what are the 4 types of goods

private goods, public goods, common resources, and artificially scarce goods

explain private goods

excludable and rival

explain public goods

nonexcludable and nonrival

explain common resources

nonexcludable but rival

explain artificially scarce goods

excludable but nonrival

recreate the chart that depicts four types of goods

sad

what kinds of goods and services can markets supply efficiently

private goods which are excludable and rival

what kind of problem does nonexcludable goods have

they have a free-rider problem which means many individuals are unwilling to pay for consumption of nonexcludable goods

what do nonexcludable goods (common resources & public goods ) suffer from

inefficiently low production which means they are undersupplied

goods that are excludable and nonrival (artificially scarce goods) suffer from

inefficiently low consumption which means they are underconsumed

street cleaning is best characterized as a

public good

toilet paper is a rival good because

if one person uses several sheets of toilet paper, no one else can

C

examples of public goods

public sewer system, defense, scientific research

what are some nonmarket ways to provide public goods

voluntary contributions, individuals or firms who make money in an indirect way, social encouragement or pressure in small communities, the government

how should a government decide how much of a public good to produce

produce the quantity where marginal social benefit of a public good = marginal cost of producing it

A

whats the solution to the overuse of common resources

tax or regulate the use of the common resource, create a system of tradable licenses for the right to use the common resource, and make it excludable and assign property rights to it

recreate a graph that depicts an artificially scarce good

D

B