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Chapter 11 Public Goods and Common Resources

The document discusses public goods and common resources, which are nonexcludable and nonrival or rival respectively. It describes characteristics of goods and different types of goods. It also discusses issues like free riding, tragedy of the commons, and policy options to prevent overconsumption of common resources.

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lav
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197 views

Chapter 11 Public Goods and Common Resources

The document discusses public goods and common resources, which are nonexcludable and nonrival or rival respectively. It describes characteristics of goods and different types of goods. It also discusses issues like free riding, tragedy of the commons, and policy options to prevent overconsumption of common resources.

Uploaded by

lav
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER 11: PUBLIC GOODS AND  COST – BENEFIT ANALYSIS – a study

COMMON RESOURCES that compares the costs and


benefits of providing a public good

When goods are free, market forces are


absent COMMON RESOURCES
The private market may fail to provide the  Cannot prevent free riders from
socially efficient quantity of such goods using
 Little incentive for firms to provide
Government can sometimes improve
 Role for gov’t: seeing that they’re
market outcomes
provided
CHARACTERISTICS OF GOODS  Each person’s use reduces others’
ability to use
 EXCLUDABLE – exclusive for certain
people THE TRAGEDY OF COMMONS
 RIVAL IN CONSUMPTION – use of it
 A parable that illustrates why
diminishes other’s use
common resources get used more
DIFFERENT KINDS OF GOODS than is socially desirable
 A tragedy is due to an externality
 PRIVATE GOODS – excludable & rival
in consumption POLICY OPTIONS TO PREVENT
 PUBLIC GOODS – not excludable & OVERCONSUMPTION OF COMMON
not rival in consumption RESOURCES
 COMMON RESOURCES – rival in  Regulate use of the resource
consumption but excludable  Impose a corrective tax to
 NATURAL MONOPOLIES –excludable internalize the externality
but not rival  Auction of permits allowing use of
PUBLIC GOODS resource
 If the resource is land, convert in
 Are difficult for private markets private and divide it to individuals
because of free-rider problem (a
person who receives the benefits of SOME IMPORTANT COMMON RESOURCES
a goods but avoids paying for it)  Clean air and water
 If the benefit of a public good  Congested roads
exceeds the cost of providing it,  Fish, whales, and other wildlife
gov’t should provide the good and
pay for it with a tax on people who
benefit

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