Chapter 76, Problem 2FRQ

a)

To determine

The two characteristics which are shared by every public good

Explanation of Solution

The two characteristics which are shared by every public good, involves:

1. Non-excludable: It is impossible for the people to prevent others from the consumption of public goods such as in this case, no resident can exclude other residents from using the public good and this is an expensive good which means this public good is non-excludable.
2. Non-rival good: Here, it is also difficult for the producer to sell goods to each individual in the society. The producer cannot prevent people from using the public good. And, there would be no additional cost for each unit of public good, therefore, this good involves the characteristic of non-rival goods.

Economics Concept Introduction

Introduction: Excludable refers to the situation when according to peoples’ willingness to pay, producers can prevent certain people from using or consuming goods and services. And, rival in consumption means if one person consumes a good or service then it reduces the amount of available goods and services for consumption by another.

A public good cover both non-excludable as well as non-rival.

b)

To determine

The Additional cost of providing the public good to new member of the community

Explanation of Solution

The additional cost would be zero when public goods are provided to the new community member because these goods are non-rival in consumption. As these goods are provided at the same cost without any additional cost which means the same unit of the public good is available for every new member with the same price. In this case, when a member is added to the community then, that person will also consume the good at the similar price or cost because public goods are provided without any kind of added cost.

Economics Concept Introduction

Introduction: Excludable refers to the situation when according to peoples’ willingness to pay, producers can prevent certain people from using or consuming goods and services. And, rival in consumption means if one person consumes a good or service then it reduces the amount of available goods and services for consumption by another.

A public good cover both non-excludable as well as non-rival.