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ch16 - Public Goods and Common Resources Classifying Goods...

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Chapter 16 Public Goods and Common Resources Classifying Goods and Resources A public good is a good or service that can be consumed simultaneously by everyone and from which no one can be excluded. A public good is: o Nonrival o Nonexcludable A private good is: o Rival o Excludable Study the definitions of rival, nonrival, excludable, and nonexcludable on p. 364 of your textbook. Why does the government produce services such as national defense, environmental protection, public health services, and a legal system? Why don’t we buy our environmental protection from Arctic Ozone Inc, just like we buy our doughnuts from Tim Horton’s? The answer is that there is a free-rider problem. A free rider is a person who consumes a good without paying for it. To understand the free-rider problem and see how public choices can overcome it, we must study the benefits and costs of a public good. Public Goods and the Free-Rider Problem Total benefit is the total dollar value that a person places on a given level of provision of a public good. Marginal benefit is the increase in total benefit that results from a one- unit increase in the quantity of a public good.
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The figure below shows the marginal benefit of a public good. Part (a) shows Lisa’s marginal benefit.
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