Chapter 10, Problem 7P

To determine

Concept Introduction:

Public good: A good or service whose consumption by a person will not result in a reduction of its amount for the other person of the society and no one from the society can be excluded from the use of public goods. A Public good can be said as a good which is non-rival and even non-excludable. Some examples of public goods are:public parks, national defense and sewer system.

Rival and Non-rival goods: If a good or service consumed by a person alone at a time and its consumption is prevented from the other persons at that point of time then this kind of good is known as a rival good.

If a good or service consumed by a person alone and its consumption is not prevented from the other persons at that point of time, then this kind of good is known as a non-rival good. Generally, private goods are treated as rival goods and public goods are treated as non-rival goods.

Excludable and Non-Excludable goods: If people are prevented from the use of the good they have not paid for, then such goods are treated as excludable goods, whereas if people cannot be prevented from the use of the good they have not paid for, then such goods are treated as non-excludable goods.