Public Choices and Public Goods

Question 1

Choices

Econ theory

Answer 1

1) Private (decision consequences one person making it)
2) Public (consequence many people)
- why government exist why less than perfect job

Question 2

Public choices and political marketplace

Answer 2

1) Demand (voters-taxes, firms- campaign)

2) Supply (politicians - policy proposals, bureacrats- public g/s)

Question 3

Private good/ Public good, Common resources, Natural monopoly goods
Mixed good

Answer 3

• Rival/excludable (car)
• Non non (law)
• Rival, Non-excludable (fish in ocean)
• Non-rival, excludable (Internet)
• Private good creates external cost/ben, falls someone other than prod/consumer (Health/Education - vacination, benefit company, travel - carbon dioxide)

Question 4

Conserve common resources
Providing public good
Efficient public provision

Answer 4

• tragedy of the commons, no incentive pay/conservce, limit overuse (fishing)
• free rider problem (helicopers, no one incentive pay private provision)
• Number of helecopters equally unhappy overprov, under prov

Question 5

The principle of minimum differentiation

Answer 5

• similar appeal max voters

- well inform, evaluate, alternatives, votes

Question 6

Inefficienty public overprovision

Answer 6

• max bureacrats persuade Q at MSC>MSB

- voters dont know best for them (cba learn - beuracracts overprovide)

Question 7

Positive externalities

Answer 7

• when SB>PB
• MEB gap between M(P)B and MSB
• Make decision on private

Question 8

Graphs

Answer 8

• D = M(p)B
• MSB
• S = MSC
• deadweight loss between MB=MSC
• therefore 3 devices used subsidy make MSB=MB (dif between MB and MSB paid by tax payer) 1) voucher 2) public productions 3) Private subsidies

Question 9

Bureacratics inefficiency & Gov failiure

Answer 9

• estimate MSB = MSC< efficient

- bureacrats rational ignorance - market failiure