Congestible public goods and private goods

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CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS WITH EXTERNALITIES WITH EXTERNALITIES Goods and services have been divided into four categories: 1. Pure private goods 2. Price-excludable public goods 3. Congestible public goods 4. Pure public goods The first category represents goods that approximate the ideal of a pure private good that is individually consumed and subject to low-cost exclusion from benefits for those who do not pay for the right to receive such benefits. The production of these goods usually does not generate an externality.
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33 CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS WITH EXTERNALITIES WITH EXTERNALITIES Such private goods might be sold in markets either by private firms or government. When sold in markets, their costs of production are financed by the revenue obtained from sales to individual buyers. Alternatively, they may be produced by government or purchased by government from private firms, distributed free of direct charge to eligible recipients, and financed by taxes. Such is the case for public welfare programs that give medical services, food, housing, and other services to low-income citizens who meet certain eligibility tests. These services also could be sold at subsidized prices, with losses made up from tax-financed subsidies.
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34 CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS WITH EXTERNALITIES WITH EXTERNALITIES Second, some goods can be individually consumed and are subject to exclusion, but their production or consumption is likely to generate externalities. These are price-excludable public goods . Again, such goods can be distributed through markets when produced either by private firms or government. The production or consumption of these goods can be subsidized to account for the positive externality associated with their sale. The good would be financed by both the revenue from sales and the taxes used to finance the subsidy.
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35 CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS WITH EXTERNALITIES WITH EXTERNALITIES Such is the case for private and public hospitals, mass transit facilities, and schooling. These goods also can be produced by government and distributed with no direct charge. In such cases, however, the quantity and quality of the service would be determined collectively through political institutions, and costs would be financed through taxation. This is the case for public schooling, public sanitation service, and government-supplied inoculations that are available at public health facilities.
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36 CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS CONGESTIBLE PUBLIC GOODS AND PRIVATE GOODS WITH EXTERNALITIES WITH EXTERNALITIES Congestible public goods are nonrival in consumption only up to a certain point. After the number of consumers exceeds a certain amount, the goods become at least partially rival in consumption.
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