Public Goods

An essential characteristic of a public good is that it is non-excludable. This means that

• Public goods are of equal benefit to all consumers

• There is no opportunity cost in the provision of public goods.

• People could consume the good without paying for it.

• The government should not levy a tax for providing public goods.

Which one of the following goods is excludable?

• A city bus

• A bridge that does not charge a toll

• Protection from the police force

• The atmosphere

Negative externalities in production results in market failure. This is because at the free market equilibrium

• marginal social cost is greater than the marginal private cost

• marginal private benefit is greater than the marginal private cost

• marginal private benefit is greater than the marginal private cost

• marginal social cost is less than the marginal private benefit

Public goods are provided by the government because

• Private firms do not take into account the impact of external costs

• Governments are more efficient than private firms at producing public goods

• Private firms will make an economic profit

• Free-rider problems result in underproduction by private markets

Which is closest to being a public good?

• Electricity

• Health services

• Water supply

• Street lighting

Free riding can occur if a good is

• A private good

• Excludable and nonrival

• Non-excludable and rival

• Non-excludable and non-rival

Which one of the following goods exhibits non-excludability?

• Consumption by one person reduces the amount available for others

• Consumption by one person does not affect others

• Consumption by one person increases the amount available for others

• Consumption is limited to a specific group

Which one of the following goods is nonexcludable?

• The atmosphere

• An art museum

• A toll bridge

• All of the above