微观经济学11Word

　　Public Goods and Common Resource

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　　“The best things in life are free. . .” Free goods provide a special challenge for economic analysis. Most goods in our economy are allocated in markets…

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　　“The best things in life are free. . .” When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.

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　　“The best things in life are free. . .” When a good does not have a price attached to it, private markets cannot ensure that the good is produced and consumed in the proper amounts.

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　　“The best things in life are free. . .” In such cases, government policy can potentially remedy the market failure that results, and raise economic well-being.

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　　THE DIFFERENT KINDS OF GOODS When thinking about the various goods in the economy, it is useful to group them according to two characteristics: Is the good excludable? Is the good rival?

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　　THE DIFFERENT KINDS OF GOODS Excludability Excludability refers to the property of a good whereby a person can be prevented from using it.

　　Rivalry Rivalry refers to the property of a good whereby one person’s use diminishes other people’s use.

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　　THE DIFFERENT KINDS OF GOODS Four Types of Goods Private Goods Public Goods Common Resources Natural Monopolies

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　　Figure 1 Four Types of Goods

　　Rival? Yes Private Goods Yes No Natural Monopolies

　　Ice-cream cones Clothing Congested toll roadsCommon Resources

　　Fire protection Cable TV Uncongested toll roadsPublic Goods Tornado siren National defense Uncongested nontoll roads

　　Excludable? Fish in the ocean The environment Congested nontoll roads

　　No

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　　PUBLIC GOODS A free-rider is a person who receives the benefit of a good but avoids paying for it.

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　　The Free-Rider Problem Since people cannot be excluded from enjoying the benefits of a public good, individuals may withhold paying for the good hoping that others will pay for it. The free-rider problem prevents private markets from supplying public goods.

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　　The Free-Rider Problem Solving the Free-Rider Problem The government can decide to provide the public good if the total benefits exceed the costs. The government can make everyone better off by providing the public good and paying for i

　　t with tax revenue.

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　　Some Important Public Goods National Defense Basic Research Fighting Poverty

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