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lectur6-page49 - the movie by requiring that they pay for a...

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49 49 Public Goods NON-EXCLUSION PRINCIPLE : u There is no technology available to prevent people who do not pay for the good or service from consuming it, OR the costs of exclusion are prohibitively high relative to the commodity's benefit. It is believed that the private sector will under produce, or not produce at all, a commodity in which it cannot exclude people from consuming without paying a price for the commodity that covers production costs and allows the firm a reasonable profit. What is the incentive for a firm to produce a commodity if it cannot make any money? The non-exclusion principle means that there is no technology available to prevent people who do not pay for the good or service from consuming it, or the costs of exclusion are too high relative to the commodities benefit. (Mabry and Ulbrich, Intro. To Economic Principles, McGraw-Hill, Inc., 1989, ISBN 0-07-044797-7). A movie is collectively consumed, but we can exclude people from watching
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Unformatted text preview: the movie by requiring that they pay for a ticket. So a movie is not a public good, it is a private good. North Carolina has a provision in it’s state constitution forbidding toll roads. The beltline is collectively consumed, and our North Carolina constitution forbids a means to exclude people from using the road by using toll booths to collect fees for road use. Therefore, in North Carolina, our road system is by definition a public good. What about national defense? Would it be produced by the private sector in quantities that would be effective? How would a business firm exclude people from consuming national defense? How could the business firm legally make people pay for national defense? If you don’t pay, does the private business firm have the right to kick you out of the country? Put you in prison?...
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