Chapter_16_-_Answer_to_Textbook_Problems

Chapter_16_-_Answer_to_Textbook_Problems - 16 Answers to...

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16 PUBLIC GOODS AND COMMON RESOURCES A n s w e r s t o t h e P r o b l e m s 1. a. Gettysburg National Military Park is nonexcludable and nonrival. It is a public good. b. A Big Mac is excludable and rival. It is a private good. c. The Brooklyn Bridge is nonexcludable (because there is no toll for using it) and rival (especially when it is crowded). It is a common resource. d. The Grand Canyon is nonexcludable and nonrival. It is a public good. e. Air is nonexcludable and rival. (If someone uses air, for instance, pollutes it, then no one else can use the same air.) It is a common resource. f. Police protection is nonexcludable and rival. It is a common resource. g. Sidewalks are nonexcludable and rival (when they are crowded). They are a common resource. h. U.S. Postal system is rival (a carrier cannot deliver mail to my house and your house simultaneously) and excludable (a user must buy a stamp). It is a private good. i. FedEx is rival (a carrier cannot deliver a package to my house and your house simultaneously) and excludable (a user must pay). It is a private good. j. The MyEconLab web site is excludable and nonrival. It is a natural monopoly. 2. a. There is a free rider problem because everyone can watch the display regardless of whether or not the person paid for it. b. Interstate 81 potentially has a free rider problem. However if the state of Virginia uses the gas tax revenue it receives from the sale of gasoline near the interstate to pay to maintain the freeway, then users of the Interstate pay for the road. In this case there is no free rider problem. c. Wireless Internet access in hotels can avoid the free rider problem is the hotel limits use of the access to guests staying at the hotel. d. Sharing downloaded music has a free rider problem. Once someone pays to download music, assuming that the music producer has not placed limits on its use, then sharing the music is nonexcludable (amongst friends) and nonrival. e. The public library has a free rider problem because people can use the library even if they pay no taxes to support it. 3. a. The capacity that achieves maximum net benefit is 2.5 million gallons a day. Net benefit is maximized at the capacity where marginal social benefit equals marginal social cost, which is 2.5 million gallons a day.
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