Chapter%2011.A

Chapter%2011.A - CHAPTER 11 PUBLIC GOODS AND COMMON...

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1 CHAPTER 11 CHAPTER 11 PUBLIC GOODS AND COMMON RESOURCES PUBLIC GOODS AND COMMON RESOURCES
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2 Main issues What are public goods? What are common resources? Examples 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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3 We consume many goods without paying: parks, national defense, clean air & water. When goods are free, the market forces that normally allocate resources are absent. The private market may fail to provide the socially efficient quantity of such goods. Note: Governments can sometimes improve market outcomes.
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4 Important Characteristics of Goods A good is excludable if a person can be prevented from using it. excludable : clothes, dial-up internet service 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 music file
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5 The Different Kinds of Goods Excludable? Private Goods Private Goods • Ice cream cones • Clothing • Congested toll roads Common Resources Common Resources • Fish in the ocean • Environment • Congested non-toll roads Natural Monopolies Natural Monopolies • Fire protection • Cable TV • Uncongested toll roads Public Goods Public Goods • Tornado siren • National defence • Uncongested non-toll roads Rival? Yes No Yes No
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6 Discussion A road is which of the four kinds of goods?
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The Different Kinds of Goods Focus: public goods and common resources (i.e., goods that are not excludable).
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This document was uploaded on 03/14/2011.

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Chapter%2011.A - CHAPTER 11 PUBLIC GOODS AND COMMON...

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