Multiple Choice help (1 Viewer)

[oompaman]

Which statement best describes public goods?
(A)
They are provided at zero marginal costs.
(B)
Property rights tend to be easily defined.
(C)
Their price incorporates social costs.
(D)
They are non-rival and excludable.


From 2010 paper, answers say its a) but i don't understand.

 

[oompaman]

What does zero marginal costs mean?

 

[bobmcbob365]

Okay, seems lik i missed the 'marginal' part. Big mistake to have missed it ==' Scratch my previous explanation.

Now, I'm not sure then.
But I think it's similar to marginal propensity to consume/save. If you recall, marginal propensity to consume is the proportion of each extra dollar of income that is spent on consumer products as income increases. Similarly, marginal costs refers to the increase in cost to produce as production increases.
So if more public goods are provided, apparently cost of production stays the same? Don't trust me on that. lol soz

 

[freeeeee]

process of elimination b, c, and d are so obviously wrong must be A. I have no idea what zero marginal cost means but probably means that a consumer does not need to pay extra money to consume the good

 

[Bloodstriker]

The answer is D

Non-excludable means that everyone is entitled to this good. EG If the government builds a school everyone is entitled to enrol their kids.
Non-rival means that there is no competition in the industry (ie monopoly). No-one else aside from the government builds hospitals, parks, roads etc

 

[tarod]

From my understanding, as public goods and non-rival and non-excludeable, the cost of providing the good to an extra consumer is zero (as they can just free ride). This makes the marginal cost zero meaning firms are reluctant to produce public goods.

 

[RishBonjour]

it is a because
marginal cost basically means, from what I know, how much does the price of a good increase per increase in quantity.
Now, public goods are non-rival --> thus, no effect on quantity when consumed.

If you had no idea, you could have easily done it by elimination.

 

[RishBonjour]

The answer is D

Non-excludable means that everyone is entitled to this good. EG If the government builds a school everyone is entitled to enrol their kids.
Non-rival means that there is no competition in the industry (ie monopoly). No-one else aside from the government builds hospitals, parks, roads etc

lol. read D again m8 - it says "excludeable"

 

[deswa1]

Answer is definitely A-> reason it doesn't cost the government any more to provide an additional unit of the good because it is non-rival (like a footpath doesn't cost the government more if 50 people or 1000 people walk on it).

Rish's explanation is correct

 

[Leffife]

Definitely (A).
For those who think it's (D), then look carefully at your option. It says non-rival which is true, but it also says excludable, not non-excludable.

Oh just remember that marginal cost is the derivative of total production costs with respect to the level of output.
Meaning like MC of an additional unit of output is the cost of the additional inputs needed to produce that output.

 

[Bloodstriker]

lol. read D again m8 - it says "excludeable"

ahh my bad

 

[bigSKEAMO1]

Non-riv non-exclud CUTN