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Chapter 13: Q.14 (page 316)

Name two public goods and explain why they are public goods.

Short Answer

Expert verified

Police protection and radio broadcasts are two of the public goods.

Step by step solution

01

content Introduction

A nonexcludable and nonrival public good is one that is difficult for market enterprises to sell to individual clients. Public goods include a wide range of government services.

02

Content Explanation

Police protection is said to be an example of public good. Protecting only a few people in the community from burglary while excluding others would be challenging. Providing security to some people entails safeguarding the entire society from burglary. Radio transmissions are another example. It will be difficult to prevent anyone from receiving a radio signal after it has been broadcast. Furthermore, other people will not be stopped from getting the radio broadcast if one person is listening to it.

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Most popular questions from this chapter

Why might private markets tend to provide too few incentives for the development of new technology?

How do public television stations, like PBS, try to overcome the free rider problem?

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)?

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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