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Managerial Economics and Property Rights

1. What role do property rights play in creating common property resources? Why are common property resources subject to market failure due to nonexcludability?

2. What two properties characterize public goods?

3. To avoid market failure, what price must be charged for public goods? Why?

Solution Preview

1. Property rights determine how a resource is used, and who owns it. Property rights means the right to use, the right to earn income from the good, the right to transfer, and the right to enforce property rights. In creating common property resources it is important that the resource is owned by the government or by collective bodies. Common pool resource is a type of good consisting of natural or human made resource system whose size /qualities make it expensive, but not impossible to exclude potential beneficiaries from getting benefits from its use. These resources are owned and ...

Solution Summary

Special characteristics of property rights are explained in a structured manner in this response. The answer includes references used.