Unlike a private good, a public good:
A has benefits available to all, including nonpayers.
B produces no positive or negative externalities.
C has no opportunity costs.
D is characterized by rivalry and excludability.
The correct answer and explanation is:
The correct answer is A: has benefits available to all, including nonpayers.
A public good is defined by two key characteristics: non-rivalry and non-excludability. These characteristics differentiate public goods from private goods.
- Non-rivalry means that one person’s consumption of the good does not reduce its availability to others. For example, if one person benefits from clean air, it does not prevent others from also benefiting from it. In contrast, private goods are rivalrous, meaning that when one person consumes the good, it is no longer available for someone else to consume.
- Non-excludability means that it is difficult or impossible to exclude people from using the good. In the case of public goods, everyone can benefit from them, even those who do not pay for them. For example, national defense protects all citizens, regardless of whether they contribute to the funding. This is different from private goods, where only those who pay for the good can use it.
The other options are incorrect for the following reasons:
- B (produces no positive or negative externalities): Public goods often produce externalities, both positive and negative. For example, a clean and safe environment benefits everyone, which is a positive externality, while pollution can be a negative externality.
- C (has no opportunity costs): Like any good, public goods also have opportunity costs. For instance, if the government spends money on national defense, that money cannot be used for other projects like education or healthcare.
- D (is characterized by rivalry and excludability): This description actually applies to private goods, not public goods. Private goods are both rivalrous and excludable, meaning that consumption by one individual reduces availability to others, and people can be excluded from access if they don’t pay.
Thus, the main distinguishing feature of public goods is that their benefits are available to everyone, regardless of payment.