ch11 - Textbook Questions Answers (from the Publisher) Ch...

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Textbook Questions Answers (from the Publisher) Ch 11 Questions for Review 1. An excludable good is one that people can be prevented from using. A good that is rival in consumption is one for which one person's use of it diminishes another person's enjoyment of it. Pizza is both excludable, because a pizza producer can prevent someone from eating it who doesn't pay for it, and rival in consumption, because when one person eats it, no one else can eat it. 2. A public good is a good that is neither excludable nor rival in consumption. An example is national defense, which protects the entire nation. No one can be prevented from enjoying the benefits of it, so it is not excludable, and an additional person who benefits from it does not diminish the value of it to others, so it is not rival in consumption. The private market will not supply the good, because no one would pay for it because they cannot be excluded from enjoying it if they don't pay for it. 3. A free rider is a person who receives the benefit of a good but avoids paying for it. An individual cannot be a free rider when consuming a private good. Private goods are excludable, which means that someone cannot consume a private good without paying for it. 4. A common resource is a good that is rival in consumption but not excludable. An example is fish in the ocean. If someone catches a fish, that leaves fewer fish for everyone else, so it is rival in consumption. But the ocean is so vast, you cannot charge people for the right to fish, or prevent them from fishing, so it is not excludable. Thus, without government intervention, people will use the good too much, because they don't account for the costs they impose on others when they use the good. Problems and Applications 1 a. (1) Interstate highways are common resources when congested. They are not excludable, because anyone can drive on them. But they are rival in consumption, because congestion means that every additional driver slows down the progress of other drivers. When they are not congested, interstate highways are public goods, because they are no longer rival in consumption.
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(2) University education is a private good. It is excludable, because someone who does not pay can be prevented from taking classes. It is rival in consumption, because the presence of an additional student in a class reduces the benefits to others. (3) National defense is a public good. It is not excludable and it is not
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This note was uploaded on 11/21/2010 for the course DSE 4010 taught by Professor Chiu during the Spring '10 term at 한동대학교.

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ch11 - Textbook Questions Answers (from the Publisher) Ch...

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