Public and Private Goods

Question One 

The two characteristics of public goods include non-excludability and non-rivalry. Non-excludability is a feature of the public good that stresses that no one should be denied accessing or using a public good whatsoever. Non-rivalry is a quality that emphasizes the consumption of a product or service by an individual not affecting another person’s consumption of the same. The significance of the two characteristics can be seen in the manner in which private businesses operate. For instance, private firms are less likely to produce goods that are non-rival or non-excludable because they do not promise significant amount of profits. The free-rider problem as it applies to public products is a state when people benefit from goods that they do not contribute to the cost of production. The U.S. border patrol is a private good and not a public good in as much as many would believe. This is because the consumption of private goods limits the availability of the product for others to consume. That said, the increase in border patrol activities increases the population of a country thereby causing overpopulation with time.

Question Two 

A product like Lojack car recovery system has both private and public benefits; thus, to some extent, both a private a public good. The product helps the government fight crime in the country and restore law and order, making it easy for the government to implement its critical function of safety and security promotion. To make this a much easier and efficient function, the subsidizing the product is to ensure its affordability is necessary. The challenge that should be noted for the subsidizing Lojack car recovery system is that despite leading to more positive public outcome, it may result in market failure of the product. This can occur when profit margins are minimized, or the producer of the product is driven into losses.

Question Three 

Citizens interested in maximizing economic efficiency might be happy to invest in their governments even with the possibility of the government coercing them in some situations for a variety of reasons. They include prevention of market failure, combating pollution, managing fraudulent activities, and protecting consumers against unethical business practices. The absence of government interventions gives private businesses corporations large amount of freedom which some of them exploit and engage in unwanted business practices that are detrimental to environmental and socio-economic aspects of life. For example, in some countries, because of inadequacy or lack of control of governments, businesses freely pollute the environment, exploit resources uncontrollably, pollute the environment, and more.

Question Four 

The limited and bundling choice is a concept that is ultimately beneficial to an economy in a diverse range of ways. For instance, it helps consumers arrive at decisions on what goods or services to consume. Logically, being exposed to few options in terms of products and services speeds up the process of decision-making. An excellent example to illustrate this is a buyer having to choose between two brands of cars; in such a scenario, it becomes more natural and fast to pick one over the other. If there were unlimited amount (or combination) of choices, on the other hand, it would take a significant amount of time for a consumer to arrive at a decision. Using the same example above, this happens when a buyer is required to choose a car from tens of car brands or more. The implications of this is that slows down the economy.