Instructor's Manual IMChap004

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1、Part2–PublicExpenditure:PublicGoodsandExternalitiesChapter4–PublicGoodsBriefOutline1.PublicGoodsDefined2.EfficientProvisionofPublicGoodsa.DerivingtheEfficiencyConditionb.ProblemsinAchievingEfficiencyc.TheFreeRiderProblem3.Privatizationa.PublicversusPrivateProvisionb.Publi

2、cversusPrivateProduction4.PublicGoodsandPublicChoiceAnswerstoEnd-of-ChapterQuestions1.a.Wildernessareaisanimpurepublicgood–atsomepoint,consumptionbecomesnonrival;itis,however,nonexcludable.b.Satellitetelevisionisnonrivalinconsumption,althoughitisexcludable;thereforeitisan

3、impurepublicgood.c.Medicalschooleducationisaprivategood.d.Televisionsignalsarenonrivalinconsumptionandnotexcludable(whenbroadcastovertheair).Therefore,theyareapublicgood.e.Anautomatictellermachineisrivalinconsumption,atleastatpeaktimes.Itisalsoexcludableasonlythosepatrons

4、withATMcardsthatareacceptedbythemachinecanusethemachine.ThereforetheATMisaprivategood.2.a.False.Efficientprovisionofapublicgoodoccursatthelevelwheretotalwillingnesstopayforanadditionalunitequalsthemarginalcostofproducingtheadditionalunit.b.False.Duetothefreeriderproblem,i

5、tisunlikelythataprivatebusinessfirmcouldprofitablysellaproductthatisnon-excludable.However,recentresearchrevealsthatthefreeriderproblemisanempiricalquestionandthatweshouldnottaketheanswerforgranted.Publicgoodsmaybeprivatelysupportedthroughvolunteerism,suchaswhenpeoplewhoa

6、ttendafireworksdisplayvoluntarilycontributeenoughtopayfortheshow.c.Uncertain.Thisstatementistrueiftheroadisnotcongested,butwhenthereisheavytraffic,addinganothervehiclecaninterferewiththedriversalreadyusingtheroad.d.False.Therewillbemoreusersinlargercommunities,butallusers

7、haveaccesstothequantitythathasbeenprovidedsincethegoodisnonrival,sothereisno4-3Copyright©2014McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.Part2–PublicExpenditure:PublicGoodsandExternalitiesreasonsla

8、rgercommunitieswouldnecessarilyhavetoprovidealargerquantityofthenonrivalgood.1.WeassumethatCheet