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Public Goods and Common Property. Public Goods n Nonrival -- quantity available to other people does not fall when someone consumes it n Nonexcludable.

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Presentation on theme: "Public Goods and Common Property. Public Goods n Nonrival -- quantity available to other people does not fall when someone consumes it n Nonexcludable."— Presentation transcript:

1 Public Goods and Common Property

2 Public Goods n Nonrival -- quantity available to other people does not fall when someone consumes it n Nonexcludable -- prohibitively expensive to provide the good only to people who pay for it

3 Public Good

4 n In graph, private market would not produce Q=1 because no individual consumer would pay MSC. Once firm has produced product, it cant exclude others who might enjoy it n Consumers could cooperatively purchase Q=1, but there is the free rider problem

5 Tragedy of the Commons n Fishing experiment n Rival, but not excludable n Property Rights as solution n Social norms as alternative to property rights

6 Drawbacks of private property rights –High costs of defining or enforcing property rights –Difficulty of charging for use –High transactions costs –Fairness

7 Four Categories of Goods n Private Goods –Rival and excludable n Public Goods –Nonrival and nonexcludable n Common Resources –Nonexcludable, but rival n Natural Monopolies –Excludable but nonrival

8 Discussion n Classify the following –Police protection –Education –The Internet Globally Web access at the Colleges n Why does government provide items that are not public goods?


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