Microeconomics chapter 11
quote that illustrates the Tragedy of the Commons
"What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others"
producers have little incentive to produce a public good because
there is a free-rider problem
Excludability is the property of a good whereby
a person can be prevented from using it
a lighthouse is considered to be a public good because
all passing ships are able to enjoy the benefits of the lighthouse without paying
when an infinite value is placed on human life, policymakers who rely on cost-benefit analysis
are forced to pursue any project in which a single human life is saved
which is not a characteristic of a public good?
because it is a free good, there is no opportunity cost
Governments can improve market outcomes for
both public goods and common resources
Using a toll to reduce traffic when congestion is greatest is an example of a
corrective solution
both private goods and club goods are
excludable
a free-rider problem
explains why many local governments supply public goods
advocates of antipoverty claim that fighting poverty
is a public good
national defense is a classic example of a public good because
it is difficult to exclude people from receiving the benefits from national defense once it is provided
Both public goods and common resources are
nonexcludable
an AM radio transmission of a baseball game is
not excludable and not rival in consumption
a local park filled with picnickers is
not excludable and rival in consumption
When a good is rival in consumption
one persons use of the good diminishes another person's ability to use it
most goods in the economy are
private goods
goods that are excludable include both
private goods and club goods
a free-rider is a person who
receives the benefit of a good but avoids paying for it
if one person's use of a good diminishes another person's enjoyment of it, the good is
rival in consumption
when a free-rider problem exists
the market will devote too few resources to the production of the good
in a cost-benefit analysis, the value of a human life is sometimes calculated on the basis of
the risks that a person voluntarily exposes herself to in her job and/or recreational choices
example of a common resource
visitors can enter the park free of charge, but frequently all of the picnic tables are in use
example of a club good
visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables