Principles+of+Economics+7th+Edition+Mankiw-Solution+Manual Chapter 11

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1、Chapter11/PublicGoodsandCommonResources❖20711r11PUBLICGOODSANDCOMMONRESOURCESWHAT’SNEWINTHESEVENTHEDITION:Therearenomajorchangestothischapter.LEARNINGOBJECTIVES:Bytheendofthischapter,studentsshouldunderstand:Øthedefiningcharacteristicsofpublicgoodsandcommonresources.Øwhyprivatemarketsfailtoprovide

2、publicgoods.Øsomeoftheimportantpublicgoodsinoureconomy.Øwhythecost–benefitanalysisofpublicgoodsisbothnecessaryanddifficult.Øwhypeopletendtousecommonresourcestoomuch.Øsomeoftheimportantcommonresourcesinoureconomy.CONTEXTANDPURPOSE:Chapter11isthesecondchapterinathree-chaptersequenceontheeconomicsoft

3、hepublicsector.Chapter10addressedexternalities.Chapter11addressespublicgoodsandcommonresources—goodsforwhichitisdifficulttochargepricestousers.Chapter12willaddressthetaxsystem.ThepurposeofChapter11istoaddressagroupofgoodsthatarefreetotheconsumer.Whengoodsarefree,marketforcesthatnormallyallocateres

4、ourcesareabsent.Therefore,freegoods,suchasplaygroundsandpublicparks,maynotbeproducedandconsumedintheproperamounts.Governmentcanpotentiallyremedythismarketfailureandimproveeconomicwell-being.KEYPOINTS:·Goodsdifferinwhethertheyareexcludableandwhethertheyarerivalinconsumption.Agoodisexcludableifitisp

5、ossibletopreventsomeonefromusingit.Agoodisrivalinconsumptionifoneperson’suseofthegoodreducesother’sabilitytousethesameunitofthegood.Marketsworkbestforprivategoods,whicharebothexcludableandrivalinconsumption.Marketsdonotworkaswellforothertypesofgoods.©2012CengageLearning.AllRightsReserved.Maynotbes

6、canned,copiedorduplicated,orpostedtoapubliclyaccessiblewebsite,inwholeorinpart.Chapter11/PublicGoodsandCommonResources❖207·Publicgoodsareneitherrivalinconsumptionnorexcludable.Examplesofpublicgoodsincludefireworksdisplays,nationaldefense,andthecreationoffundamentalknowledge.Becausepeoplearenotchar

7、gedfortheiruseofthepublicgood,theyhaveanincentivetofreeride,makingprivateprovisionofthegooduntenable.Therefore,governmentsprovidepublicgoods,basingtheirdecisionaboutthequantityofeachgoodoncost–benefitanalysis.·Co