d. Rural roads are public goods. They are not excludable and they are not rival in consumption because they are uncongested. e. City streets are common resources when congested. They are not excludable, because anyone can drive on them. But they are rival in consumption, because congestion means that every additional driver slows down the progress of other drivers. When they are not congested, city streets are public goods, because they are no longer rival in consumption. 4. Both public goods and common resources involve externalities. a. Are the externalities associated with public goods generally positive or negative? Use example in your answer. Is the free market quantity of public goods generally greater or less than the efficient quantity? b. Are the externalities associated with common resources generally positive or negative? c. Use example in your answer. Is the free market quantity of common resources generally greater or less than the efficient quantity? Answer: a. The externalities associated with public goods are positive. Because the benefits from the public good received by one person do not reduce the benefits received by anyone else, the social value of public goods is substantially greater than the private value. Examples include national defense, knowledge, uncongested nontoll roads, and uncongested parks. Because public goods are not excludable, the free-market quantity is zero, so it is less than the efficient quantity. b. The externalities associated with common resources are generally negative. Because common resources are rival in consumption but not excludable, the use of the common resources by one person reduces the amount available for others. Because common resources are not priced, people tend to overuse them their private cost of using the resources is less than the social cost.
Examples include fish in the ocean, the environment, congested non-toll roads, the Town Commons, and congested parks.
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