Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 16, Problem 2.1P
To determine
Which of the statement is more persuasive about public goods and controlling of the market failure.
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What are “public goods”? Pick a government good/service that you consume, define what makes it a public good (how is its non-rival and non-excludable). As we discussed in class, the existence of externalities creates an efficiency problem in the provision of these goods and services. Unlike the private sector, State and Local Governments can intervene. Using the example of the public good, you have provided, please provide an example of an externality that will impact its provision, and detail how a government could/should intervene.
How do public television stations, like PBS, try to overcome the free rider problem? Define the problem, and then discuss the solutions.
[Be sure to explain, what you mean by public good, and what is the free rider problem. Then use the explanation to apply to the public television situations]
Answer the question based on the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last
unit of a public good, rather than do without it. These people are the only two members of society.
Q
Pa
Pb
1
$ 3
$ 5
2
4
3
1
3
4
1
Suppose government has already produced 4 units of this public good. The amount individual B is willing voluntarily to pay for the fourth unit is
Chapter 16 Solutions
Principles of Economics (12th Edition)
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- What characteristic of public goods makes it very difficult for private firms to provide (or provide the correct amount of) the public good? What "problem" does this characteristic lead to that generally results in the need for the government to provide the public good? Explain this "problem."arrow_forwardThe accompanying table relating to a public good provides information on the prices Young and Zorn are willing to pay for various quantities of that public good. These two people are the only members of society. Determine the price that society is willing to pay for the public good at each quantity of output. If the government’s marginal cost of providing this public good is constant at $7, how many units of the public good should government provide? Why not less? Why not more?arrow_forwardDefine a public good and, using a graph, explain the equilibrium of a pure public good.arrow_forward
- Economics Present a model of public good provision. What is the Pareto efficient quantity of the public good? How might the Pareto efficient quantity be provided in the economy?arrow_forwardPublic goods are often thought to be goods or services that are provided by the government, but that is confusing cause and effect. What are the characteristics of a public good? Hint: Who provides the public good is not one of the characteristics.arrow_forwardDefine a public good. Give an example of a public good using your definition. Explain how to construct the market demand curve for a public good.arrow_forward
- Can you answer with explanation and show formula. The accompanying table relating to a public good provides information on the prices Young and Zorn are willing to pay for various quantities of that public good. These two people are the only members of society. Determine the price that society is willing to pay for the public good at each quantity of output. If the government’s marginal cost of providing this public good is constant at $7, how many units of the public good should government provide?arrow_forwardWhich of the following is a characteristic of a public good, as defined by economists? Group of answer choices -Any good that the government provides is a public good. -The good is free, such as education. -The good is nonexcludable -The good is depletable (or rivalrous).arrow_forwardWhich of the following statements are true? (more than once could be correct, deductions for incorrect answers). A. Perfectly competitive markets with many buyers and sellers can normally internalize externalities via natural market forces and therefore do not normally call for policy intervention. B. Negative externalities cause too much production and consumption of a good relative to the social optimum while positive externalities cause too little production and consumption of a good relative to the social optimum. C. Negative externalities cause too little production and consumption of a good relative to the social optimum while positive externalities cause too much production and consumption of a good relative to the social optimum. D. Both positive and negative externalities in an otherwise perfectly competitive market cause deadweight loss. E. Negative externalities in otherwise perfectly competitive markets cause deadweight loss while positive externalities actually improve…arrow_forward
- Suppose there are three consumers of a public good with the following marginal benefits of consumption related to the quantity of the public good provided: Consumer 1: MB1 = 5 – 2Q Consumer 2: MB2 = 4 – Q Consumer 3: MB3 = 3 – Q Calculate and draw the total marginal benefit function of the public good in a fully labelled diagram. If the marginal cost of producing the public good is MC = 2Q, what is the efficient quantity and how much should each consumer contribute to its provision if it were to provided at the efficient level (assuming the non-rival and non-excludable problems could be resolved)?arrow_forwardConsider the market illustrated in the figure to the right. Supply curve S, represents the private cost of production and demand curve D₁ represents the private benefit from consumption. Suppose the consumption of this good creates a positive externality. In turn, the social benefit from consumption is represented by demand curve D₂. Show how the externality affects market efficiency. Use the triangle drawing tool to shade in the new economic surplus (New surplus) or the deadweight loss (Deadweight loss) created by the positive externality. Properly label this shaded area. Carefully follow the instructions above, and only draw the required objects. Price Quantity S₁ D₁ D₂ Qarrow_forwardOffer an example of a good that has become a public (or quasi-public) good due to technology. Explain how technology has made this good non-rival in consumption or non-excludable. Is there a free rider problem with the good you mentioned? How can the free rider problem be addressed in this example?arrow_forward
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