Question

At ABC Square in downtown Newark, the city charges skaters $3 to use the rink. I.C. Snow, a local community activist, argues that this fee is unfair. She claims that the rink is a public good – it is operated by the city’s Parks and Recreation department, and the construction of the ABC Square area (and the rink itself) was financed with taxpayer money.
The director of the Parks and Recreation department has asked you to prepare a response to I.C. Snow’s argument.
How will you respond? Is her claim that the rink is a public good valid? Why or why not? Does it make sense to charge a fee for using the rink?

Answer 1

Answer:-

Non-rivalrous goods are those goods which can be consumed by one individual without affecting the consumption of others. These type of goods can be used again and again with no marginal cost. Consumption by one does not decrease the consumption of others.

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A good is called "non-excludable", if there is no possibility of excluding someone, who has not paid for it, from the consumption of that good. That is, a person cannot be excluded from its consumption.

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A public good is a good which is both non-rivalrous" and "non-excludable" in nature. That is, the consumption of the public good does not lead to a decrease in the consumption of others and it is impossible to exclude someone from free-riding the good.

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The rink used for skating is not a public good because it may be non-rivalrous in nature, but it is excludable.

That is, a person can be excluded from the using the rink for skating if he does not pay an S3 charge for its usage. It is easy to exclude someone.

It is non-rivalrous up to a certain point because any additional skater can skate there at no marginal cost to the city (rink owners). However, it will overcrowd after some point if the price is lowered and it will become rivalrous as well.

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Therefore, the rink is not a public good and it makes sense to charge a fee of $3 to use it otherwise the rink will be overcrowded and there will be a market failure.