Question

PROBLEMS AND APPLICATIONS 1. Think about the goods and services provided by your local government. a. Using the classification in Figure 1, explain which category each of the following goods falls into: police protection snow plowing • education rural roads • city streets b. Why do you think the government provides items that are not public goods?

Answer 1

1) (a) police protection is a type of club good because it can be excludable(police may ignore some neighborhoods) but not rival in consumption. It can act as a private good in the case when they are too busy to handle crimes then one's person's use can reduce the amount of police protection available for the rest of people

snow plowing is a type of common resource which is non-excludable but rival in consumption because plowing one street means another street has not been plowed

education is a type of private good because it is both excludable (the one who is unable to pay the fees may be excluded from attending the classes) and rival (with the increase in strength of students in the class may reduce the benefit for other students ) in consumption but it has a positive externality

rural roads are public goods as they are not excludable and also not rival in consumption because one's use does not affect use for the other as roads in rural areas are uncongested

city streets are a type of common resources when congested as they act as a rival in consumption in that case but when it is uncongested it acts as a public good because they no longer act as a rival in consumption

b) government provides items that are not public goods because of the positive externality associated with them as we can see in the case of education which is a private good but education support it through providing subsidy as it associates positive externality with it