Economics 1021A/B Chapter Notes - Chapter 17: Private Good, Marginal Cost, Satellite Television

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lemonoyster494

29 Dec 2015

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ECON 1021A/B Full Course Notes

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Classifying goods and resources: goods, services, and resources differ in the extent to which people can be excluded from consuming them and the extent to which one person"s consumption rivals the consumption of others, excludable. A god is excludable if it is possible to prevent someone from enjoying its benefits. A good is nonexlcudable if it is impossible (or extremely costly) to prevent anyone from benefiting from it: rival. A good is rival if one persons use of it decreases the quantity available for someone else. A good is nonrival if one persons use of it does not decrease the quantity available for someone else: a fourfold conclusion. A private good is both rival and excludable. Coke and a fish on cooke aquaculture"s farm are examples of private goods. A public good is both nonrival and nonexlcudable. A public good can be consumed simultaneously by everyone, and no one can be excluded from enjoying its benefits.

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1. Categories of goods

Complete the following table by selecting the appropriate definition for each of the given terms.

If a good is both excludable and nonrival in consumption, then it is __________.

Options for 1st blank:

A) Consumption of the good by one person decreases the ability of other people to consume the good.

B) Consumption of the good by one person does not decrease the ability of other people to consume the good.

C) It is not possible to prevent an individual from using the good.

D) The satisfaction derived from consuming the good is affected by the price a consumer pays for the good.

E) Those who are unwilling or unable to pay for the good do not obtain its benefits.

Options for 2nd blank:

A) Consumption of the good by one person decreases the ability of other people to consume the good.

B) Consumption of the good by one person does not decrease the ability of other people to consume the good.

C) It is not possible to prevent an individual from using the good.

D) The satisfaction derived from consuming the good is affected by the price a consumer pays for the good.

E) Those who are unwilling or unable to pay for the good do not obtain its benefits.

Options for 3rd blank:

A) a common resource

B) a club good

C) a private good

D) a public good

viridianjackal166

List the public-good aspects (if any) of the following goods:

a. Safety.

1.It involves choices the public makes, such as safe driving, that enhances their own safety.

2.When one person acts in a safe manner, it affects others not included in the decision to act safely. It reduces risks to others.

3.Safety has no public-good aspects, since it is both rival and excludable.

4. If safety provides a safe environment, it is provided for all people, and one person enjoying safety does not preclude others from benefiting from that safety.

b. Street names.

1.Naming streets allows people to orient themselves in towns and facilitates communication. Since the government is in charge of naming streets, they are a public good.

2.Naming streets is not a public good because it is up to each person to navigate maps and streets. Naming streets allows people to orient themselves in towns and facilitates communication. Although everyone benefits from street names, no one wants to pay the costs if some people are free riders. The government eliminates the free rider problem by using tax dollars to name streets, thus creating a public good.

3.Naming streets has no public-good aspects, since street names are rival (unique to towns) and excludable (once used in a town, it cannot be used again).

4. Naming streets allows people to orient themselves in towns and facilitates communication. Once a street is named, it benefits all people. No one can be excluded from referring to that name. In addition, one person using that street name does not preclude others from referring to that street.

C. A steak dinner.

1.A steak dinner is a public good because an entire cow has to be butchered to produce the steak. Other people receive the remaining meat, making the steak a public good.

2.A steak dinner is a public good because cows graze on public land. In this way, farmers are often free riders and the meat they produce is actually a public good.

3.A steak dinner has no public-good aspects, since it is both rival (if one person eats it, no one else can) and excludable (if you don't pay for it, you don't get it).

4. A steak dinner is a public good because the government subsidizes meat farms. In other words, the price of a steak is partly paid for by taxes, making the steak itself a public good.

harlequingrasshopper92

A sprinkler system inside of one house does not protect houses on the other side of town. It also requires the homeowner to purchase and install it prior to benefiting from it. Once installed, it can help stop fires from jumping to neighboring homes. Given this information we can argue:

	A.	There may be justification for government intervention to encourage consumption of indoor sprinkler systems due to their public good nature of being non-rival and non-excludable.
	B.	There may be justification for government intervention to encourage consumption of indoor sprinkler systems due to positive externalities.
	C.	There is no justification for government intervention to encourage consumption of indoor sprinkler systems as there is no market failure.
	D.	There may be justification for government intervention to encourage consumption of indoor sprinkler systems due both to positive externalities and that they are public goods.

plumdonkey393

Economics 1021A/B Chapter Notes - Chapter 17: Private Good, Marginal Cost, Satellite Television

ECON 1021A/B Full Course Notes

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