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Chapter 11

Microeconomics - Chapter 11.docx

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Rita Cossa

Microeconomics – Chapter 11 (Public Goods & Common Resources) Excludable - If a person can be prevented from using it - Ex. Fish Tacos and Wireless internet  Excludable - Ex. National Security and FM radio  Non-Excludable Rival in Consumption – If one person’s use diminishes others’ use - Ex. Fish Tacos  Rival - Ex. MP3 files of a new song  Non-Rival Private Goods – Excludable and Rival - Ex. Food Public Goods – Non-Excludable and Non-Rival - Ex. National Security, knowledge created through basic research, fighting poverty Common Resources – Non-Excludable and Rival - Ex. Fish & other wildlife, clean air and water, congested roads Natural Monopolies – Excludable and Non-Rival - Ex. Cable TV Public Goods: - Externalities arise from both public goods and common resources due to something of value having no price to it - Private decisions about consumption and production leads to an inefficient outcome - Public Policy  Economic well-being - Public goods are difficult for private markets to provide due to free-riders Free Riders – A person who receives a benefit of a good without having to pay for it - If the good is not excludable, people tend to become free riders - Firms can’t prevent non-payers from c
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