Week 13_Public Goods - Econ 122 Principles of...

Econ 122: Principles of
Microeconomics
Public Goods &
Common Resources
PUBLIC GOODS AND COMMON RESOURCES
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In this chapter,
look for the answers to these
questions:

What are public goods?
What are common resources?
Give examples of each.

Why do markets generally fail to provide the
efficient amounts of these goods?

How might the government improve market
outcomes in the case of public goods or common
resources?
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PUBLIC GOODS AND COMMON RESOURCES
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Important Characteristics of
Goods

A good is excludable if a person can be prevented
from using it.

Excludable : fish tacos, wireless internet access

Not excludable : FM radio signals, national defense

A good is rival in consumption if one person’s
use of it diminishes others’ use.

Rival : fish tacos

Not rival :
An MP3 file of Kanye West’s latest single

PUBLIC GOODS AND COMMON RESOURCES
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The Different Kinds of Goods
Private goods : excludable, rival in consumption
Example: food
Public goods : not excludable, not rival
Example: national defense
Common resources : rival but not excludable
Example: fish in the ocean
Natural monopolies : excludable but not rival
Example: cable TV


A road is which of the four kinds of goods?

Hint : The answer depends on whether the road
is congested or not, and whether it’s a toll road
or not. Consider the different cases.
L E A R N I N G
Categorizing roads
A C T I V E
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5


Rival in consumption? Only if congested.

Excludable? Only if a toll road.
Four possibilities:
Uncongested non-toll road: public good
Uncongested toll road: natural monopoly
Congested non-toll road: common resource
Congested toll road: private good
A C T I V E L E A R N I N G
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Answers
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PUBLIC GOODS AND COMMON RESOURCES
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