Tuesday, January 17, 2006

Public and Private Goods

Q:

One quick question about public goods. A few times throughout the solutions to the practice problems, it is stated that public goods are not required to be non-excludable, but merely need low-rivalry.
However, the book and my section notes tell me otherwise (that both are required). Which is correct?


A:
Go with what is in the section notes and the book. As a refresher:

Private goods: excludable and rival

Public goods: neither excludable nor rivel

Common resources: rival but not excludable

Natural monopoly: excludable but not rival

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