ECO101H1 Chapter Notes - Chapter 11: Natural Monopoly

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apricotbutterfly891

14 Mar 2016

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ECO101H1 Full Course Notes

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A free rider is a person who receives the benefit of a good but avoids paying for it. The government provides public goods because the private market on its own will not produce an efficient quantity. A cost-benefit analysis is a study that compares the costs and benefits to society of providing a public good. The tragedy of the commons is a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole. Goods differ in whether they are excludable and whether they are rival in consumption. A good is excludable if it is possible to prevent someone from using it. A good is rival in consumption if one person"s use of the good reduces other people"s ability to use the same unit of the good. Markets work best for private goods, which are both excludable and rival in consumption. Markets do not work as well for other types of goods.

Related Questions

Answer the following problem based on Externalities and Public Goods that we discussed in class:

	Rival	Non-Rival
Excludable
Non-Excludable

Fill in the table to represent each of the four types of goods. Use examples to earn full credit.

What is the difference between a positive and a negative externality? Give examples to earn full credit.

How does the free rider problem relate to goods that non-excludable with non-rivalry?

How does moral hazard relate to goods that are excludable with non-rivalry?

How does the marginal-cost marginal-benefit rule apply to avoid demand-side and supply-side market failures?

Identifying and Providing Types of Goods

You will explain why some goods should be provided by the government and others should be provided by businesses. Given a list, correctly identify types of goods based on excludability and rivalness. Support

your answer.

TTask 1:

Consider the following list of goods. For each good, explain the following points.

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private market should provide this good or the government should provide this good. Explain in terms of whether the characteristics of the good would make it difficult to be provided

by the private market or the government.

Answer for each event below.

A cup of coffee at a coffee shop

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associa

ted with this good?

Explain whether the private market should provide this good or the government should provide this good. Explain in terms of whether the characteristics of the good would make it difficult to be

provided by the private market or the

government.

City fire protection

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private mark

et should provide this good or the government should provide

this good. Explain in terms of whether the characteristics of the good would make it difficult to be

provided by the private market or the government.

Polar bears in the Arctic