Radio stations, tornado sirens, light houses, and street lights are all public goods in that all are nonrivalrous and nonexclusionary. Therefore why does the government provide tornado sirens, street lights and light houses but not radio stations (other than PBS stations)?

Short Answer

Expert verified

The government provides tornado sirens, street lights, and light houses because they are essential to the safety of citizens. No private firm would be incentivized to fund these things themselves because they provide no private benefit or internalized social benefit.

Radio stations are often funded privately because stations can receive a private benefit through advertising.

Step by step solution

01

Concept Introduction

The two major standards that distinguish a public true are that it must be non-rivalrous and non-excludable. Non-rivalrous method that the products do no longer dwindle in deliver as more people eat them; non-excludability way that the best is to be had to all citizens.

02

Explanation

It says that radio stations, twister sirens, lighthouses and avenue lighting fixtures are all public items in that all our non rivalrous and non exclusionary. but, radio stations on Lee match public items that definition in a technical way. So unlike the other matters that are cited there as public items, radio stations are a touch bit exclusive. he's in being is that radio stations have advertising on them, and the radio stations are paid for with the aid of that advertising. And in case you are listening to the radio, then you definately turn out to be listening to the ones classified ads as well. So at the same time as you aren't necessarily directly paying the radio station, you're paying them not directly, paying them in a roundabout way by way of sacrificing a number of it slow paying attention to the classified ads. after which a positive portion of the humans listening will become the usage of the goods and provider is which can be being advertised. So they may be paying the character making the advertisement, who then is in flip paying the radio station

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Most popular questions from this chapter

The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company’s demand for financial capital for research and development of these gadgets, based on expected rates of return from sales. Now, say that every investment would have an additional 5% social benefit—that is, an investment that pays at least a 6% return to the Gizmo Company will pay at least an 11% return for society as a whole; an investment that pays at least 7% for the Gizmo Company will pay at least 12% for society as a whole, and so on. Answer the questions that follow based on this information.

Estimated rate of returnPrivate profits of the firm from an R&D project (in \( millions)
10%\)100
9%\(102
8%\)108
7%\(118
6%\)133
5%\(153
4%\)183
3%$223

a. If the going interest rate is 9%, how much will Gizmo invest in R&D if it receives only the private benefits of this investment?

b. Assume that the interest rate is still 9%. How much will the firm invest if it also receives the social benefits of its investment? (Add an additional 5% return on all levels of investment.)

Will the demand for borrowing and investing in R&D be higher or lower if there are no external benefits?

In what ways do company investments in research and development create positive externalities?

HighFlyer Airlines wants to build new airplanes with greatly increased cabin space. This will allow HighFlyer Airlines to give passengers more comfort and sell more tickets at a higher price. However, redesigning the cabin means rethinking many other elements of the airplane as well, like engine and luggage placement, and the most efficient shape of the plane for moving through the air. HighFlyer Airlines has developed a list of possible methods to increase cabin space, along with estimates of how these approaches would affect the plane's operating costs and ticket sales. Based on these estimates, Table 13.5 shows the value of R&D projects that provide at least a certain private rate of return. Column 1 = Private Rate of Return. Column 2 = Value of R&D Projects that Return at Least the Private Rate of Return to HighFlyer Airlines. Use the data to answer the following questions.

Private rate of returnValue of R&D
12%\(100
10%\)200
8%\(300
6%\)400
4%$500

a. If the opportunity cost of financial capital for HighFlyer Airlines is 6%, how much should the firm invest in R&D?

b. Assume that the social rate of return for R&D is an additional 2% on top of the private return; that is, an R&D investment that had a 7% private return to HighFlyer Airlines would have a 9% social return. How much investment is socially optimal at the 6% interest rate?

Why is a football game on ESPN a quasi-public

good but a game on the NBC, CBS, or ABC is a public good?

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