13 Public goods

Question 1

private goods

Answer 1

• excludable - only consumers who have paid for a product can access it
• rivalrous - consumption by one person prevents the same consumption by another
• rejectable - potential consumers can make a choice to not consume the product
• marginal cost - producing one more creates extra cost for producer

Question 2

public goods

Answer 2

• non-excludable - potential consumers cannot be prevented from consuming a good without paying for it
• non-rivalrous - when consumption of a good does not prevent consumption by another person
• non-rejectable - when consumption can not be prevented b another consumer
• zero marginal cost - wen production of additional unit does not add extra costs to the business

Question 3

quasi-public goods

Answer 3

have some characteristics of private goods and some of public goods

Question 4

free rider problem (market failure)

Answer 4

occurs when a person benefits from consuming shared resource or good without paying for that good

Question 5

evaluation of the provision of public goods

Answer 5

• government provision - national defense is a public good and provided by the government for the benefit of all if gov did not provide it it would be underprovided because each individual consumer would want to spend significant amount of money on its provision

Question 6

factors on why government provides public goods

Answer 6

• opportunity cost - what would it give up spending on to provide spending on another sector
• cost of provision - increases taxes to be able to provide the public good
• risk of under provision
• public perception - is good really needed, would public prefer gov spending on something else
• politics - left-wing prioritise provision of public goods and right-wing believe free-market is better