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public goods

Public Goods:
a.Are public goods market imperfections, that are characterized by positive externalities?
b.Discuss the positive spillover benefit or the "free rider" problem as it relates to public goods. Give examples
c.Are public goods better provided by the government or private sector? Give reasons and examples
d.How do you allocate the cost of public goods

Solution Preview

a. Yes, public goods are market imperfections to the degree that the market doesn't recognize the benefit society derives from them. The positive externalities they generate do not accrue to those who produce them. Therefore, there are less of them then there would be without government intervention.

b. The free rider problem is when those who don't pay for a good are able to use the public goods which are funded by others. Once these goods are made available to one person, it is not possible to prevent another from consuming the good. For example, consider citizens collecting donations to fund a private police force. Everyone wants to cut down on crime, but no one wants to be the one who pays for it. ...