Benefits of the project to society as a whole it is

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benefits of the project to society as a whole. It is difficult to do because of the absence of prices needed to estimate social benefits and resource costs. The value of life, the consumer’s time, and aesthetics are difficult to assess.
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PUBLIC GOODS AND COMMON RESOURCES 16 SOME IMPORTANT PUBLIC GOODS National defense Knowledge created through basic research Fighting poverty
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PUBLIC GOODS AND THE FREE-RIDER PROBLEM The Benefit of a Public Good The value of a private good is the maximum amount that a person would pay for one more unit, which is shown by the person’s demand curve. The value of a public good is the maximum amount that all the people are willing to pay for one more unit of it. The total benefit of a public good to an individual is the dollar value that a person places on a given level of provision of the good.
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PUBLIC GOODS AND THE FREE-RIDER PROBLEM Private Provision by Market If a private firm tried to produce and sell a public good, almost no one would buy it. The free-rider problem results in too little of the good being produced.
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PUBLIC GOODS AND THE FREE-RIDER PROBLEM Public Provision Government can tax all the consumers of the public good and force everyone to pay for its provision. Public provision overcomes the free-rider problem. If two political parties compete, each is driven to propose the efficient quantity of a public good. A party that proposes either too much or too little can be beaten by one that proposes the efficient amount, because more people vote for an increase in net benefit.
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PUBLIC GOODS AND THE FREE-RIDER PROBLEM Why Government is Large and Grows Government grows because the demand for some public goods is income elastic. Government might be too large because of inefficient over-provision.
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PUBLIC GOODS AND THE FREE-RIDER PROBLEM Voters Strike Back If government grows too large relative to the value voters place on public goods, there might be a voter backlash that leads politicians to propose smaller government. Privatisation is one way of coping with overgrown government, and is based on distinguishing between public provision and public production of public goods.
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COMMON RESOURCES The Tragedy of the Commons The tragedy of the commons is the absence of incentive to prevent the
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