Chapter 11: Public Goods and Common Resources

Natural Monopolies:

Non Rival, Excludable (Cable TV, Uncongested Toll Road)

Public Goods:

Non-excludable, and Non-rival (National Defense, Uncongested Non Toll Road)

What is a Free Rider?

Person who enjoys the benefit of Free factors, avoiding to pay yet abuses it

What are the types of goods?

Private Goods, Public Goods, Common Resources, and Natural Monopolies

Common Resources:

Rival, Non-excludable (Ocean Fish, Congested Non Toll Road)

What is the Cost-benefit analysis?

A study comparing cost and benefits of providing a public good

Non Rival:

An mp3 file

Example of tragedy of the commons:

An overuse of a simple resource that society cannot maintain and conserve use. (i.e. Water and Electricity)

Private Goods:

Excludable, Rival in consumption (Food, Congested Toll Road)

Non Excludable examples:

FM Radio signals, national defense

Rival examples:

Food

Excludable examples:

Food, Wifi

Policy Options to Prevent Overconsumption of CR:

Regulation, Corrective Taxes, Auction off permits, Conversion of public to private good

What does excludable mean?

If a person can be prevented from using the good

What does rival in consumption mean?

If a person's use diminishes (takes away) the right of another person's use

What is Tragedy of the Commons?

When Common Resources > Socially Desirable