16. PUBLIC GOODS AND COMMON RESOURCES. CHAPTER. Objectives. After studying this chapter, you will able to Distinguish among private goods, public goods, and common resources. Explain how the free-rider problem arises and how the quantity of public goods is determined
PUBLIC GOODS AND COMMON RESOURCES
1.The average catch per boat, which is the marginal private benefit, MPB, decreases as the number of boats increases.
2. The marginal cost per boat isMC (assumed constant).
3.Equilibrium occurs where marginal private benefit, MPB, equals marginal cost, MC.
In equilibrium, the resource is overused because no one takes into account the effects of her/his actions on other users of the resources.
1.The marginal social benefit curve, MSB, is below the MPB curve.
2. The resource is used efficiently when MSB equalsMC.