11Public Goods and Common ResourcesMicroeonomicsP R I N C I P L E S O FP R I N C I P L E S O FN. Gregory MankiwN. Gregory Mankiw1
In this chapter, In this chapter, look for the answers to these look for the answers to these questions: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?22
3IntroductionWe consume many goods without paying: parks, national defense, clean air & water. When goods have no prices, the market forces that normally allocate resources are absent. The private market may fail to provide the socially efficient quantity of such goods. One of the Ten Principles from Chapter 1: Governments can sometimes improve market outcomes.
4Important Characteristics of GoodsA good is excludableif a person can be prevented from using it. Excludable: fish tacos, wireless internet accessNot excludable: FM radio signals, national defenseA good is rival in consumptionif one person’s use of it diminishes others’ use. Rival: fish tacosNot rival: An MP3 file of Kanye West’s latest single
5The Different Kinds of GoodsPrivate goods: excludable, rival in consumptionExample: foodPublic goods: not excludable, not rivalExample: national defenseCommon resources: rival but not excludableExample: fish in the oceanClub Goods/ Natural monopolies: excludable but not rivalExample: cable TV
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.A C T I V E L E A R N I N G A C T I V E L E A R N I N G 11Categorizing roadsCategorizing roads66