Public Goods
Your government has decided to build a new recreational facility that will have weight rooms, a swimming pool, a running track, etc. Your government claims that this exercise facility will encourage people to get more exercise and be healthier. The cost of this project is ONE HUNDRED MILLION dollars. The government will finance this project by borrowing by issuing government bonds, and from voluntary, charitable contributions from the super-rich. Access and entry into the new facility will be free-of-charge to ALL the people in the community.
As construction continues on this rec. center, YOU have no intention of ever using it. You certainly have not donated any money for the project; in fact you think the whole thing is a waste of money. You prefer that the government spend more money subsidizing undergraduates by paying for their textbooks. However, you are not unwilling to benefit from exercise, should it potentially make you healthier.
1. What is it about this recreational center that "might" qualify it as being a public good? (5 points possible)
2. What is meant by the "free rider" issue and how "might" this issue affect you personally with respect to the exercise project? (5 points possible)
3. From a public good standpoint how would this rec. center differ from a government project to build a toll bridge across the San Francisco Bay? (10 points possible)
4. Now, your government decides to build a huge museum of modern art in your city. Once again, construction costs are covered by government borrowing. But once built, the museum charges an admission of $12.00 for entry. Are there some aspects of this museum that makes it a public good? Can you call the museum a merit good? What is a merit good? (15 points possible)
5. With the case of the modern art museum, the government hopes to "pay" for the on-going costs of the project with admission fees. With the exercise facility, there is no obvious fee collected from the people who use it. In what ways do you think the government hopes that it (or the community) will be compensated for this $100 million outlay for the new recreation hall? For full credit, give specific examples. (15 points possible)
