Public Goods and Market Mechanisms

Questions and Answers

What characteristic of public goods allows free-riders to benefit without payment?

Rejectability

Excludability

Rivalry

Non-excludability (correct)

Which of the following is NOT an example of a public good?

Streetlight

Lighthouse

Flood control

Private security service (correct)

Which of the following best describes the feature of non-rivalry in public goods?

One person's consumption does not reduce availability for others. (correct)

Goods are provided at a cost to users.

One person's consumption diminishes another's consumption.

Everybody pays for the benefits equally.

What is an example of a community good?

National defense Signup and view all the answers

Which of the following indicates continuous consumption of public goods?

Traffic lights Signup and view all the answers

What differentiates collective goods from community goods?

Collective goods can have user charges levied. Signup and view all the answers

Study Notes

Market Limitations

Markets struggle to exist without specific conditions; absence of conditions inhibits market formation.
Public goods are not provided by market mechanisms due to inability to withhold goods for non-payment.

Characteristics of Public Goods

Non-rivalry: One person's consumption does not diminish the availability for others, exemplified by streetlights.
Non-excludability: Goods cannot restrict access to only those who pay, allowing for free-riders, as seen in radio and television broadcasts.
Social vs Private Benefits: Social benefits, like healthcare and education, outweigh individual private benefits.
Non-rejectability: Individuals cannot refuse consumption, as with street lighting.
Continuous Consumption: Public goods such as traffic lights are always in use.

Types of Goods

Collective Goods: Include parks, beaches, streets, roads, public transport, and sanitation systems; may sometimes require user fees for users.
Community Goods: Examples are defense services, police, prisons, and streetlights; display both non-rivalry and non-excludability.

Description

Explore the unique characteristics of public goods and the challenges markets face in providing them. This quiz covers key concepts such as market conditions, examples of public goods, and their implications for economic theory. Assess your understanding of community and collective goods in the context of market functions.