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Economics 1021A/B
Emilie Rivers

Economics Chapter 17 Classifying Goods and Resources -Excludable  It’s possible to prevent someone from enjoying its benefits  Pay to consume a good  Nonexcludable – it is impossible or extremely costly to prevent anyone from benefiting from it  Police services -Rival  If one person’s use of it decreases the quantity available for someone else  Fish can only be consumed by one person  Nonrival – one person’s use of it does not decrease the quantity available for someone else  Services of the police -A Fourfold Classification  Private Goods – rival and excludable, a can of coke  Public goods – both Nonrival and Nonexcludable, national defense  Common Resources – rival and Nonexcludable, unit can be used only once, no one can be prevented form using what is available, ocean fish  Natural Monopoly Good – Nonrival and excludable, cable television Public Good -The Free-Rider Problem  Enjoys the benefits of a good or service without paying for it  No one has an incentive to pay his or her share of the cost  Market would provide an inefficiently small quantity of a public good  MSB > MSC, deadweight loss arise -Marginal Social Benefit from a Public Good  A person’s MB from a public good, diminishes as the quantity of the good increase, MB curve slopes downward  Everyone gets the same quantity of a public good, MSB curve is the sum of the Marginal Benefits of all individuals at each quantity, vertical sum of the individual MB curves -Marginal Social Cost of a Public Good  MSC determined same ways as private good  MC and the MSC curve slopes upward -Efficient Quantity of a Public good  MSB = MSC  MSB > MSC, resources can be used more efficiently by increase the quantity  MSC > MSB, resources can be used more efficiently by decreasing the quantity -Inefficient Private Provision  My own private consumption will be greater if I free ride and do not pay my share of the cost of the satellite system  If I don’t pay, I enjoy the same level of security and I can buy more private
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