Public Choice and Public Goods. CHAPTER 16. © 2003 South-Western/Thomson Learning. Introduction. In most of our previous discussions, we have been talking about private goods Private goods have two important features
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© 2003 South-Western/Thomson Learning
Across the top, goods are either rival or nonrival. Down the left, goods are either exclusive or nonexclusive.
Open-access goods are usually regulated by government, and public goods are usually provided by government.
2Exhibit 2: Market for Public Goods
Da and Dm are the respective demand curves reflecting the marginal benefits that Alan and Maria, respectively, enjoy at each rate of output.
How much mosquito spraying should the government provide? Suppose the marginal cost of spraying is a constant $15 an hour. The efficient level of output is found where the marginal benefit to the neighborhood equals the marginal cost 2 hours per week.
Dollars per hour
Hours of mosquito spraying
Why admit you really value the good if, as a result, you get a higher tax bill?
Even if the government had accurate information about marginal valuations, some households earn much more than others a greater ability to pay taxes
Distribution of Benefits
- Farm Subsidies
Distribution of Costs
- Tort Reform
- Labor Union