2.03 The Role of Government in a Market Economy

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Public or Private?

Decide if the given item is a public or private good.

Police
1. Public good
2. Private good
Answer: a. Public. When police squads patrol a neighborhood, for example, everyone benefits. It is difficult to exclude non-payers. Consumption by one does not diminish usefulness for another.
Flood control
1. Public good
2. Private good
Answer: a. Public. It is difficult to exclude non-payers from benefiting from flood control. Consumption by one does not diminish usefulness for another.
Gourmet coffee shops
1. Public good
2. Private good
Answer: b. Private. It is easy to exclude non-payers. If consumers could consume whether they pay or not, businesses would have no incentive to produce gourmet coffee shops.
High school education
1. Neither a public good nor a private good
2. Both a public and a private good
Answer: b. Both. Consumers (students) can easily be excluded. However, there is an element of shared consumption. For example, the addition of 1 more student to a class of 20 probably will not do much to diminish the education of the original 20. Because of the overall benefits to society of education and because the private sector may not produce enough of it, we have chosen not to exclude people from receiving an education at public schools.
Movie Tickets
1. Public good
2. Private good
Answer: b. Private. It is easy to exclude non-payers. If consumers could consume whether they pay or not, businesses would have no incentive to produce movies.
Severe weather warning system
1. Public good
2. Private good
Answer: a. Public. It is difficult to exclude non-payers from benefiting from hearing a siren. Consumption by one does not diminish usefulness for another.
Laptop computer
1. Public good
2. Private good
Answer: b. Private. It is easy to exclude non-payers. If consumers could consume whether they pay or not, businesses would have no incentive to produce laptop computers.

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