EC120 Chapter Notes - Chapter 11: Rush Hour, Environmental Degradation, Externality

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17 Oct 2012

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EC120 Full Course Notes

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Nature provides some of them, such as rivers, mountains, beaches, lakes, and oceans. The government provides other, such as playgrounds, parks, and parades. In each case, people do not pay a fee when they choose to enjoy the benefit of the good. When goods are available free of charge, the market forces that normally allocate resources in our economy are absent. When a good does not have a price attached to it, private markets cannot ensure that the good is produced and consumed in proper amounts. Buyers and sellers in a market typically do not take account of the external effects of their decisions. Rival in consumption-the property of a good whereby one person"s use diminished other people"s use. Goods are then divided into four categories: private goods-goods that are both excludable and rival in consumption. It is excludable because you can prevent someone from eating it.

Related Questions

1. Because public goods are:

a. Excludable, people have an incentive to be free riders.

b. Excludable, people do not have an incentive to be free riders.

c. Not excludable, people do not have an incentive to be free riders.

d. Not excludable, people have an incentive to be free riders.

2. The provision of a public good generates a/an

a. Negative externality, as does the use of a common resource.

b. Positive externality and the use of a common resource generates a negative externality.

c. Negative externality and the use of a common resource generates a positive externality.

d. Positive externality, as does the use of a common resource.

3. When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.

a. True

b. False

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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 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.

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.

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.

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?

Common resources differ from public goods in that

A) unlike public goods, common resources are rival in consumption.

B) common resources are resources that cannot be renewed, but the production of public goods can be increased at any time.

C) common resources are collectively owned by a group of people while public goods are government-owned.

D) common resources are non-excludable while public goods are excludable to those who do not pay for the good.

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EC120 Chapter Notes - Chapter 11: Rush Hour, Environmental Degradation, Externality

EC120 Full Course Notes

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