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Public Goods and
Common Resources
Microeonomics
P R I N C I P L E S
O F
P R I N C I P L E S
O F
N. Gregory Mankiw
N. Gregory Mankiw
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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?
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Introduction
We 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.
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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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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
Club Goods/ Natural monopolies
:
excludable but
not rival
Example:
cable TV
A road is which
of 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
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Categorizing roads
Categorizing roads
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