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Chapter 17

Economics Chapter 17 Public Goods and Common Resources.docx

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Department
Economics
Course Code
ECON 1050
Professor
Eveline Adomait

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Economics Chapter 17 Public Goods and Common Resources Excludable- a good that is possible to prevent someone from enjoying its benefits Nonexcludable- good that it is impossible (or extremely costly) to prevent anyone from benefiting from it Rivan good is if one person’s use of it decreases the quantity available for someone else Nonrival good if one persons use of it doesn’t decrease quantity available for someone else Fourfold Classification 1. Private goods- good both rival and excludable 2. Public goods- both nonrival and nonexcludable. Can be consumed simultanteously by everyone and no one can be excluded from enjoying its benefits 3. Common Rescources- is rival and nonexcludable. A unit can be used only once, but no one can be prevented from using what is available 4. Natural Monopoly Good- nonrival and excludable. When buyers can be excluded if they don’t pay but the good is nonrival, margial cost is zero Public Goods Free-Rider problem- free rider enjoys benefits of a good/ service without paying for it (good is both nonrival and nonexcludable) - free rider problem is that market would provide an inefficient small quantity of a public good - marginal social benefit from he public good would exceed its arginal social cost and a deadweight loss would arise efficient level of provision of a public good is that at which marginal social benefit equals marginal social cost competition between political parties can lead to efficient scale of provision of a public good Marginal Social Benefit from a public good - a person’s marginal benefit from a public good, like that from a private good, dimishes as quantity of the good increases- marginal benefit curves slope downward principle of minimum differentiation is the tendency for competitors to m
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