Ch-1. 11 Public Goods Common Resources

Ch-1. 11 Public Goods Common Resources - benefit of a good...

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Chapter 11 Public Goods and Common Resources
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Excludability and Rivalry Excludability is the property of a good whereby a person can be prevented from using it. Rivalry is the property of a good whereby one person’s use diminishes other people’s use.
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Public Goods and Common Resources Public goods are goods that are neither excludable nor rival in consumption. Common resources are goods that are rival in consumption but not excludable.
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Two Questions What is the efficient level of a public good? How can we provide the efficient level of a public good?
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10 25 4 7 11 3 6 9 Private valueA Private valueB $ Public good Social cost = Private cost Social value
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Two Questions What is the efficient level of the public good? How can we provide the efficient level of a public good?
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“A free rider is a person who receives the
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Unformatted text preview: benefit of a good but avoids paying for it. Public goods are goods that are neither excludable nor rival in consumption. Common resources are goods that are rival in consumption but not excludable. Number of Cars Total Cost Private Cost = Average Cost Social Cost 1 5 5 5 2 10 5 5 3 15 5 5 4 24 6 9 5 35 7 11 6 54 9 19 Social cost Private cost Cars $ C1 DR C3 C2 A B DM C4 Chapter 11 Public Goods and Common Resources Excludability and rivalry Public goods Neither rival nor excludable Example: national defense Public goods, markets, and the free rider problem Common resources Rival but not excludable Example: congested road without tolls Total cost, private cost, and social cost Tolls as a solution to road congestion...
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Ch-1. 11 Public Goods Common Resources - benefit of a good...

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