1.3.3 Public Goods

Question 1

what are the three characteristics of private goods

Answer 1

• excludability
• rivalry
• rejectability

Question 2

explain excludability

Answer 2

consumers can be excluded from consuming the good if they are not willing or able to pay for it

Question 3

explain rivalry

Answer 3

one person’s consumption of the good reduces the amount left for others to consume

Question 4

explain rejectability

Answer 4

private goods and services can be rejected as a person may not wish to buy them

Question 5

give examples of private goods

Answer 5

TV, cars

Question 6

what are the two characteristics of public goods

Answer 6

• non-excludability
• non-rivalry

Question 7

explain non-excludability

Answer 7

once the good is provided for one person, it is available to everyone as it is impossible to exclude anyone from using it

Question 8

explain non-rivalry

Answer 8

one person’s consumption of the good does not affect the amount of the good left for others to consume

Question 9

give examples of public goods

Answer 9

street lighting, public water supplies

Question 10

why would there be no provision of public goods in a free market

Answer 10

the free-rider problem

Question 11

explain the free rider problem

Answer 11

• occurs as it is impossible to prevent someone from benefitting from the good once it has been provided as it is non-excludable
• therefore there is no incentive for anyone to pay for the good
• as no one is willing to pay, firms cannot make a profit
• therefore private firms have no incentive to supply the good

Question 12

how are public goods an example of market failure

Answer 12

there is no provision of a public good/service that is in demand from the population, this is evidence of a misallocation of resources as no resources have been allocated to public goods

Question 13

why are public goods financed by the government

Answer 13

• non-excludability
• economies of scale
• public interest and equity

Question 14

explain the non-excludability reason

Answer 14

taxation ensures that everybody contributes to the funding of public goods, preventing free riding and ensuring that the costs are distributed across the entire population

Question 15

explain the economies of scale reason

Answer 15

producing public goods for a larger population can lead to lower per capita costs. Taxation allows governments to collect funds from a broad base, so more cost effective compared to private firms

Question 16

explain the public interest and equity reason

Answer 16

taxation allows governments to allocate resources based on societal priorities and ensure that public goods are provided in a way that promotes social welfare and equity

Question 17

what are quasi-public goods

Answer 17

a near public good. it has some of the characteristics of a public good

Question 18

what are the characteristics of quasi-public goods

Answer 18

• semi-non-rival
• semi-non-excludable

Question 19

explain semi-non-rival

Answer 19

up to a point, more consumers using the good does not reduce the amount available for others, however it can eventually become crowded

Question 20

explain semi-non-excludable

Answer 20

it is possible but difficult or costly to exclude non-paying consumers

Question 21

give examples of quasi-public goods

Answer 21

• crowded beaches
• free Wi-Fi