| Chapter 6 Outline |
| I. PUBLIC GOODS |
| A. Definitions and General Comments |
| 1. A public good is a good that is nonexcludable and nonrivalous. |
| a. A nonexcludable good is a good for which it is impossible or extremely
cosfly to exclude nonpayers from consumption. |
| b. A nonrivalous good is a good for which availability is unaffected by an
individual's consumption. |
| 2. Government can provide a public good more effectively than the private market. |
| a. It is costly to exclude people from the benefit of a public good. |
| | 1. A private supplier would have to identify individuals benefiting from the good and then charge them according to the benefit received. |
| | 2. Government receives payment for provision of the good through taxation. |
| b. With private provision of the public good there may be privacy costs
involved in monitoring use of the good. |
| c. A private supplier would provide too little of the good. |
| | 1. The marginal cost of providing an additional unit of a public good is zero; however, a private fn'm would charge a price greater than this marginal cost. |
| | a. Since price is greater than marginal cost, society's net benefits
are not maximized. |