ECO 205 Week 3 DQ 2 - 7517

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ECO 205 Week 3 DQ 2

 

Identify similarities and differences between common goods, public goods, private goods, and natural monopolies.

 

Private goods and public goods are both rival, meaning when a person uses it, the supply diminishes and another person might not get to use/buy it. Common goods and natural monopolies are both non-rival. One person using it does not diminish the supply or affect another’s chances of using it.

 

Private goods and natural monopolies are both excludable. The products can be kept from some people. Common goods and public goods are non-excludable and cannot be kept from people.

 

 

Provide an example of each type of good and justify your answers.

 

An example of a common good or resource is library books. Anyone can check them out, making them non-excludable. When one person has the book, another cannot read it, making it rival.

 An example of a public good is sunshine. People cannot be prevented from receiving sunshine and collecting solar energy will not reduce the amount another can collect.

 An example of a private good is steak. People can be prevented from buying steak and when a person buys one, it reduces the supply available for other people.

 An example of a natural monopoly is the internet. The internet is excludable, a person can be kept from purchasing it. The internet is not rival, meaning when one person uses it, the supply does not diminish.

 

 

Discuss possible positive or negative externalities associated with each example. How do the externalities affect the economy?

 

 

Library books contain a positive externality of knowledge and history. Since people usually do not pay to check out books, there is little economical reason to keep library books. The government remedies this by financially supporting a library.

 Sunshine has positive and negative externalities. Sunshine can produce energy, brightens the world so we can see, and gives us warmth. Sunshine can sunburn our skin, fade our paint and contribute to evaporation of our surface water. I do not think the government can do much to balance the externalities because sunshine supply does not depend on demand. Like it or hate it, it cannot be controlled.

 Steak has negative externalities of toxins expelled by the cows that make steaks. I think the positives that come from feeding people outweigh the negatives, so the externality does not affect the economy. There are no externalities that are uncompensated for outside of the price.

 The internet has positive externalities of knowledge and negative externalities of “internet garbage” or falsehoods. I think the externalities affect the economy by giving easy access to falsehoods. I think the government should tax all non reviewed websites so the user has to pay to view. This would reduce falsehoods because honest sites would just get reviewed.

 

Solution Description

ECO 205 Week 3 DQ 2

 

Identify similarities and differences between common goods, public goods, private goods, and natural monopolies.

 

Private goods and public goods are both rival, meaning when a person uses it, the supply diminishes and another person might not get to use/buy it. Common goods and natural monopolies are both non-rival. One person using it does not diminish the supply or affect another’s chances of using it.