public goods

• What are the two fundamental characteristics of pure public goods?

  Non-excludable and non-rival
• Non-excludability means no price can be charged for a public good that excludes those who have not paid
• Public goods cannot be confined to individuals who have paid for them.
• Why might it be inefficient to price public goods?

  Cost of pricing is high
• Non-rivalry means the quantity available of a public good does not diminish upon consumption
• If someone consumes a public good, the quantity available for others decreases.

  False
• Give an example of a public good that is both non-excludable and non-rival.

  Street lights
• Beaches are non-excludable because there is no cost-efficient way to price
• Beaches are non-rival because one person using the beach reduces its availability for others.

  False
• What is the free-rider problem associated with public goods?

  Incentive not to contribute
• The free-rider problem occurs because individuals can benefit from public goods without paying
• If everyone free-rides, public goods will be underprovided.
• Why do private firms avoid providing public goods?

  No profit motive
• The lack of private supply for public goods results in complete market failure
• Public goods have high demand but zero private supply.
• What is a quasi-public good?

  Public good with private characteristics
• A toll road is an example of a road that is excludable through pricing
• Roads are always non-rival during peak times.

  False
• How can technology make pure public goods excludable?

  Electronic road pricing
• Electronic road pricing in Singapore uses cameras to scan license plates
• Quasi-public goods can be privately provided if excludability is possible.