Question

Explain which category each of the following goods falls into (private good, public good, common resource or natural monopoly):

a. Police protection

b. Snow plowing

c. Education

d. Rural roads

e. City streets

Answer 1

Answer) I will first define what various kinds of goods mentioned here mean,they are as follows

• Private good-A good whose property rights are exclusive to someone who bought it that is not everyone can have access to it,only those who paid for it/fulfilled certain conditions are eligible for it,while for others access to these goods is restricted
• Public good-Goods that are available to all and use by one individual does not reduce its benefit to others
• Common resource-Similar to public goods,they are available to all,but use by one decrease its value for others
• Natural monopoly-A type of monopoly owing to certain barriers as well as huge economies of scale,that is not much choice for competitors after first mover(first mover advantage)

Based on definitions above given given goods can be classified as follows

1. Police protection-It is a public good as police protection is available to all and use by one does not decrease value of police protection for others
2. Snow plowing -It is a public good because if snow plowing is done off streets it is done for all and does not decrease value for any
3. Education is a private good as college asks you for tuition fees which means it is not accessible for all and access is restricted to only those who pay for it
4. Rural roads can be classified as a natural monopoly-Please note difference between rural roads and city streets is vehicular movement,while in city it is more,in rural areas it is negligible in comparison to city,thus in rural areas roads need not be repaired much once made properly which means first mover has advantage and there is negligible competition for road building in rural areas, thus rural roads can be classified as natural monopoly
5. City streets as described in above point has substantial vehicular movement which also leads to lesser road available to every individual,however there is no restriction to who can use it,that is this good is accessible to all ,but utilization by every individual decreases utility derived by other,this matches clearly with our definition of common resource,thus city streets can be classified as common resource.

Answer is complete.Thank you!