Pubic Goods

Question 1

what are public goods

Answer 1

goods that are consumed collectively

Question 2

give two examples of pubic goods

Answer 2

flood defence schemes / streetlights

Question 3

what are the two main characteristics of public goods

Answer 3

non excludable / non- diminishing - non - rivalry

Question 4

what does non - excludable mean

Answer 4

people cannot be stopped from consuming the good even if the haven’t paid for it

Question 5

give a scenario of where a public good is non excludable

Answer 5

e.g., you couldn’t stop an individual from benefiting from the services of armed forces

Question 6

besides being non - excludable and non - rival , what are public goods also known to be, give an example scenario too.

Answer 6

non rejectable - e.g. you can’t choose to be protected by armed forces - they’ll do it anyway

Question 7

what does non rivalry / non - diminishability mean

Answer 7

one person benefiting from the good doesn’t stop others from also benefiting

Question 8

give an example scenario of where a public good is non rivalry / non - diminishable

Answer 8

more people benefiting from flood defences doesn’t reduce the benefit to the first person to benefit

Question 9

what is the marginal cost of a public good and what does this mean

Answer 9

zero marginal cost… - means there’s no additional cost to extending the good to one more person

Question 10

give 2 other examples of public goods

Answer 10

firework displays , lighthouses

Question 11

what are private goods

Answer 11

the opposite of public goods

Question 12

what are the two characteristics of private goods

Answer 12

excludable , rivalry

Question 13

give an example scenario of when a private good is excludable

Answer 13

if you don’t pay for biscuits, you don’t get emmmm

Question 14

give an example scenario of when a private good is rivalry

Answer 14

if you eat a biscuit you stop anyone else from eating it

Question 15

besides being excludable and rivalry, what else are private goods known as , give an example scenario

Answer 15

rejectable - biscuits can be rejected

Question 16

are most goods public or private goods

Answer 16

private

Question 17

give other examples of private goods

Answer 17

bread, university education

Question 18

Some public goods take on the characteristics of private goods. what are these goods called

Answer 18

quasi [ or non - pure] public goods

Question 19

give an example of a pure public good

Answer 19

lighthouses

Question 20

give an example of a quasi public good

Answer 20

roads

Question 21

what two public good character characteristics do roads often have

Answer 21

non - excludable , non - rivalrous

Question 22

how are roads non - excludable

Answer 22

they’re free

Question 23

how are roads non - rivalrous

Answer 23

one person using a road doesn’t stop another person from using it too

Question 24

However, what can make roads excludable

Answer 24

tolls [ a charge to use a bridge or or road]

Question 25

However, what can make a road rivalrous

Answer 25

Congestion as there’s a limit to the n.o. of people who can benefit from the road at any time

Question 26

what can change a good that once has characteristics of a public good into a private good and how

Answer 26

new technology - if you own a TV, then TV channels are non - rivalrous and non - excludable[ e.g. sky news] … However, invention of digital technology can be encrypted to ensure that if people want to watch a certain channel, they have to pay for it … [ e.g. sky movies].

Question 27

are public goods over or under - provided by the free market

Answer 27

under - provided

Question 28

what characteristic of public goods causes the free rider problem

Answer 28

non - excludability

Question 29

what is the free rider problem

Answer 29

once a public good is provided it’s impossible to stop someone from benefiting from it even if they haven’t paid towards it

Question 30

give an example scenario of the free rider problem

Answer 30

a firm providing street cleaning cannot stop a free rider who has refused to pay for street cleaning, benefiting from a clean street

Question 31

what is the price mechanism

Answer 31

the system where the forces of demand / supply determine the prices of commodities

Question 32

why can’t the price mechanism work if there are free riders

Answer 32

the free riders won’t pay so the costs of commodities will just be for supply meaning firms will have to pay only

Question 33

why is it difficult to set a price for a public good

Answer 33

cause it’s difficult to work out their value to consumers

Question 34

in order to increase the price they charge, do producers tend to undervalue or overvalue the benefits of a public good

Answer 34

overvalue

Question 35

to try to get a lower price, do consumers undervalue or overvalue the benefits of a public good

Answer 35

undervalue

Question 36

How do these problems make firms feel about public goods and why

Answer 36

reluctant to supply public goods as the problem will cause market failure

Question 37

because firms don’t want to, who provides public goods instead of firms

Answer 37

the government

Question 38

how does firms supplying public goods cause market failure

Answer 38

part of market failure is when prices aren’t set right for the product or service for what they offer. since public goods are free, prices aren’t set for consumers even though public goods offer a lot.

Question 39

what are positive externalities

Answer 39

when the production or consumption of a good or service benefits a third party not directly involved in the market transaction

Question 40

give an example of a positive externality for each ..[ production and consumption] , who are the free riders in each scenario

Answer 40

consumption - education and training … benefits government in future as more workers mean more tax rev ….. production - infrastructure - benefits gov as means more transport links for workers meaning more workers meaning more tax rev

Question 41

because no market exists for externalities, what are they an example of

Answer 41

a missing market

Question 42

Some parts of the environment are public good. give an example of one which isn’t or sold on a market

Answer 42

air

Question 43

what public good characteristics does air have

Answer 43

non - excludable, non - rivalrous

Question 44

If clean air starts to run out as a result of pollution , why won’t its price rise and deter people from ‘ using it up’ [ e.g. by polluting it]

Answer 44

both clean air and dirty air cost the same [ NOTHING]

Question 45

what public good characteristic of air leads to the free rider problem

Answer 45

non - excludability

Question 46

are the benefits of not polluting the air , or cleaning the air afterwards restricted to those who have ‘paid’ for the clean air by choosing to not pollute or choosing to clean the air … and what theory is this an example of

Answer 46

no … the tragedy of commons

Question 47

what is the tragedy of commons theory

Answer 47

the idea that people acting in their own best interests will overuse a common resource without considering that this will lead to depletion [ reduction ] or degradation of the resource

Question 48

what is resource degradation… give an example scenario too

Answer 48

occurs when natural resources are made less productive by human activity . …… e.g. if land is farmed intensively, the oil ma become less fertile which means crops won’t grow as well.