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Unformatted text preview: UNIVERSITY OF WISCONSIN Economics 101 Fall 2005 Wei Zhang Problem Set 7 ANSWER KEY Public Goods and Externalities: 1) An example of a good that is both rival and excludable is (b), a pair of pants. Excludable means that access can be denied (i.e. a theme park, your house, private goods, etc. Pretty much anything that could be hidden or lucked up is excludable.) Rival means that if you are consuming something, the ability of others to consume the same good is diminished (in situations in which there might be crowding problems), or eliminated entirely (in the case of private goods). Food, fish in the sea (once theyve been caught) and roads are all rival goods. Examples of non-rival goods include radio broadcasts and sunsets. 2) (d), Neighbors enjoy the gardeners flowers, certainly illustrates the concept of external benefit. A gardener might plant flowers in her yard for her own enjoyment. If neighbors also enjoy these flowers, then great its a bonus, a.k.a. an external benefit. Arguably, (b) may be interpreted as an external benefit as great its a bonus, a....
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