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22 Feb 2018

Identifying and Providing Types of Goods

You will explain why some goods should be provided by the government and others should be provided by businesses. Given a list, correctly identify types of goods based on excludability and rivalness. Support

your answer.

TTask 1:

Consider the following list of goods. For each good, explain the following points.

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private market should provide this good or the government should provide this good. Explain in terms of whether the characteristics of the good would make it difficult to be provided

by the private market or the government.

Answer for each event below.

A.

A cup of coffee at a coffee shop

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associa

ted with this good?

Explain whether the private market should provide this good or the government should provide this good. Explain in terms of whether the characteristics of the good would make it difficult to be

provided by the private market or the

government.

B.

City fire protection

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private mark

et should provide this good or the government should provide

this good. Explain in terms of whether the characteristics of the good would make it difficult to be

provided by the private market or the government.

C.

Polar bears in the Arctic

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private market should provide this good or the government shoul

d provide

this good. Explain in terms of whether the characteristics of the good would make it difficult to be

provided by the private market or the government.

D.

Clean air

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private market should provide this good or the government should provide this good. Explain in terms of whether the characteristics of the good would make it difficult to be provided by the private market or the government.

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Beverley Smith
Beverley SmithLv2
24 Feb 2018

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Related textbook solutions

Principles of Economics
2nd Edition, 2017
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ISBN: 9781947172364
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Principles of Microeconomics
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Related questions

List the public-good aspects (if any) of the following goods:

a. Safety.

1.It involves choices the public makes, such as safe driving, that enhances their own safety.

2.When one person acts in a safe manner, it affects others not included in the decision to act safely. It reduces risks to others.

3.Safety has no public-good aspects, since it is both rival and excludable.

4. If safety provides a safe environment, it is provided for all people, and one person enjoying safety does not preclude others from benefiting from that safety.

b. Street names.

1.Naming streets allows people to orient themselves in towns and facilitates communication. Since the government is in charge of naming streets, they are a public good.

2.Naming streets is not a public good because it is up to each person to navigate maps and streets. Naming streets allows people to orient themselves in towns and facilitates communication. Although everyone benefits from street names, no one wants to pay the costs if some people are free riders. The government eliminates the free rider problem by using tax dollars to name streets, thus creating a public good.

3.Naming streets has no public-good aspects, since street names are rival (unique to towns) and excludable (once used in a town, it cannot be used again).

4. Naming streets allows people to orient themselves in towns and facilitates communication. Once a street is named, it benefits all people. No one can be excluded from referring to that name. In addition, one person using that street name does not preclude others from referring to that street.

C. A steak dinner.

1.A steak dinner is a public good because an entire cow has to be butchered to produce the steak. Other people receive the remaining meat, making the steak a public good.

2.A steak dinner is a public good because cows graze on public land. In this way, farmers are often free riders and the meat they produce is actually a public good.

3.A steak dinner has no public-good aspects, since it is both rival (if one person eats it, no one else can) and excludable (if you don't pay for it, you don't get it).

4. A steak dinner is a public good because the government subsidizes meat farms. In other words, the price of a steak is partly paid for by taxes, making the steak itself a public good.

Question 3

We saw in class that the same good can fall in different categories (public/private/club/common resource) depending on circumstances. An example of such a good would be watching a movie at the theater. If a lot of people want to watch it, the movie is a _________. If very few people want to watch it (to the point where a room could not even be filled), the movie is likely to be a _______.

A. a common resource; a public good

B. a public good; a common resource

C. a private good; a club good

D. a club good; a private good

3 points

Question 4

Which of the following statements about the free-rider problem is not true?

A. Individuals have an incentive to free-ride when the good is not excludable.

B. The kinds of goods for which the free rider problem arises are common resources and public good.

C. Markets for goods for which there is a free-rider problem are inefficient because not enough of the good is produced.

D. Goods for which the free-rider problem exists tend to be over provided relative to what would be optimal.

4 points

Question 5

To achieve the efficient provision of public goods, the

A. market should be allowed to operate without government intervention.

B. government must limit the provision of those goods.

C. government must tax producers of those goods.

D. government must either provide those goods or subsidize their production.

3 points

Question 6

Which of the following statements about public goods is not true?

A. Because people cannot be excluded from their consumption and thus have no incentive to pay for them, public goods are underprovided by the market.

B. Efficiency requires that the government provide or fund (subsidize) the provision of all public goods.

C. Efficiency requires that the government provide or fund only the public goods that create more benefits than costs to society.

D. In reality, it is hard to provide public goods efficiently.

3 points

Question 7

Public goods must be provided by the government as the market on its own will fail to provide them. However, even with government provision it is very hard to achieve efficiency. Why?

A. In reality, it is very hard (if not impossible) to accurately estimate the benefits of providing a public good.

B. A. In reality, there can be overruns in the cost of providing the public good.

C. Government decisions about which public goods to provide can be influenced by lobbying by interest groups.

D. All of the above are true.

4 points

Question 8

Which of the following is not a common resource?

A. congested roads

B. clean water

C. wild life, which hunters want to hunt and others want to view.

D. a fireworks display.

3 points

Question 9

Many species of animals must be protected by law to keep them from extinction. Why are cows not one of these endangered species even though there is such a high demand for beef?

A. Cows reproduce at a high rate and have adapted well to their environment.

B. Public policies protect cows from predators and diseases.

C. Cows are privately owned (private goods), whereas many endangered species are owned by no one (common resources).

D.There is a natural ecological balance between the birth rate of cows and human consumption.

3 points

Question 10

Which of the following statements about common resources is not true?

A. Due to the free-rider problem, common resources tend to be overused.

B. Because there is rivalry in the consumption of common resources, whenever one person uses a common resource it is imposing a negative externality on others who might also want to use it.

C. There are no private solutions to the management of common resources.

D. One of the solutions that ensures that common resources are properly managed is their privatization.

3 points

Question 11

In our analysis of the firm’s behavior and goals, when we talk about cost, we include _________, and when we talk about profit, we mean ________.

A. Explicit costs only; economic profit

B. Implicit costs only; economic profit

C. Implicit costs only; accounting profit

D. Explicit + implicit costs; economic profit

E. Explicit + implicit costs; accounting profit

3 points

Question 12

One of the differences between explicit and implicit costs is that

A. explicit costs must be greater than implicit costs.

B. explicit costs do not require a direct monetary outlay, whereas implicit costs do.

C. implicit costs do not require a direct monetary outlay, whereas explicit costs do.

D. implicit costs must be greater than explicit costs.

3 points

Question 13

Which of the following is FALSE:

A. If accounting profit is zero, then economic profit is negative

B. Economic profit takes cost the opportunity cost of time and capital into account

C. Economic Profit = Accounting Profit + Implicit Cost

D. Economic Profit = Accounting Profit – Implicit Cost

3 points

Question 14

Which of the following is an example of an implicit cost?

(i) the owner of a firm forgoing an opportunity to earn a large salary working in Wall Street

(ii) interest paid on the firm's debt

(iii) rent paid by the firm to lease office space

A. (ii) and (iii) only

B. (i) and (iii) only

C. (i) only

D. (iii) only

3 points


10. People have a strong incentive to hide their true willingness-to-pay, or valuation, of a public good because taxing officials might use it to get them to pay more taxes. This is called the

a. basis for health insurance

b. free-rider problem

c. problem with externalities

d. result of congestion effects

11. All of the examples listed below, with one exception, are public goods that at times might lose some of their public good properties when they become congested. Which example is an exception?

a. A small nonprofit clinic for homeless people funded by a charitable organization

b. Discoveries made through medical research

c. Emergency departments of nonprofit hospitals

d. A large urban nonprofit hospital

12.The primary way that the U.S. government assures health care services for senior citizens through Medicare is through

a. Financing services provided by private sector firms

b. Producing services for consumers

c. Regulating the market for some services

d. Marketing services for private producers

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