Week 13_Public Goods - Econ 122 Principles of Microeconomics Public Goods Common Resources PUBLIC GOODS AND COMMON RESOURCES 1 In this chapter look for

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

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Econ 122: Principles of Microeconomics Public Goods & Common Resources PUBLIC GOODS AND COMMON RESOURCES 1
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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? 2
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PUBLIC GOODS AND COMMON RESOURCES 3 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
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PUBLIC GOODS AND COMMON RESOURCES 4 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
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A road is whichof 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 1 5
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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 1 Answers 6
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PUBLIC GOODS AND COMMON RESOURCES 7
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