Common access resources (Tragedy of the commons)

Question 1

What are common access resources ?

Answer 1

Natural resources which have 0 private ownership established

E.g Forests , timber , pulp / Seas and sea food

Question 2

What is the tragedy of the commons ?

Answer 2

When firms act via self interest as a result they exploit common access resources leading to a depletion of that resource

Lack of private ownership leads to this

Question 3

What happens to firms if they do not exploit the resources like other competitions ?

Answer 3

If a firm stops exploiting common acess resources due to sustainability reasons , then they eventually will lose out as other competitors will take advantage and leave nothing left for those who stopped

Incentivised to exploit it

Question 4

What diagram could you use to describe this market failure ?

Answer 4

Negative externalities of production diagram (MPC>MSC)