Public Goods

Question 1

Public Goods

Answer 1

A Good or Service that is provided without profit to all members of society, either by the government or by a private individual/organisation.

Question 2

Characteristics of a Public Good (Opposite of Private Good)

Answer 2

Non-rivalry - Consumption of the good by one person does not reduce the amount available for consumption by another person

Non-excludability - Once provided, no person can be excluded from benefitting. Equally, no person can opt-out of receiving the good, which is known as non-rejectability.

Question 3

Examples of Public Goods

Answer 3

Street Lamps
Defence Protection
Police Service
Prison Service

Question 4

What is the marginal cost of providing a unit of a public good?

Answer 4

Zero

Question 5

Free Rider

Answer 5

Someone who received the benefit but allows others to pay for it. Eg if you live in an apartment near a concert, you can watch the concert without having to pay for it.

Question 6

What is a potential solution to the free rider problem?

Answer 6

A potential solution to the free rider problem is for non-pure/quasi-public goods. An example is for a toll that has to be paid to use a road.