Chapter 11, Problem 1SPPA

To determine

To classify:

The given items as private, public, common resource or natural monopoly goods.

Explanation of Solution

New Year's Eve celebration in Times Square, New York is classified as the public goods. This is because it is a free event open for all public and no one can be excluded from having it.

A city's sewer system is classified as a natural monopoly because its construction cost is very high and so few firms can build it.

The subway system in New York can be considered as public goods. The subway system can be used by many people at a time and it does not hold the concept of rivalry and excludability.

A skateboard is classified as private goods since it is excludable and rival in nature. The person who pays for it and owns it can only use it.

Cable TV is classified as private goods since it possesses the nature of rivalry and excludability. The person who pays for it can only have its benefits.

Niagara Falls is classified as a common resource since it is a natural resource. It can be seen by anybody and cannot be used as a private goods.

Economics Concept Introduction

Public goods:

Public goods are considered as goods which can be used by one person at a time. These goods do not reduce the availability of the same for other.These goods are non-rival and non-exclusive.

Private goods:

Thegoods for which the person who pays for it can only use it is termed as private goods. These goods are rival and exclusive both.

Common resource:

Common resource is referred for those goods that are costly in nature; and are non-excludable but are rival goods.

Natural monopoly goods:

Natural monopoly goods are produced by natural monopoly market and typically have very high fixed costs of production implying that very few can bear their production costs.