Unlike a private good, a public good:
a. ?is characterized by rivalry and excludability.
b. ?produces no positive or negative externalities.
c. ?has no opportunity costs.
d. ?has benefits available to all, including nonpayers.
The Correct Answer and Explanation is :
The correct answer is d. has benefits available to all, including nonpayers.
Explanation:
A public good is defined by two key characteristics: non-rivalry and non-excludability. These features distinguish public goods from private goods.
- Non-rivalry means that one person’s consumption of the good does not reduce its availability for others. For example, if one person enjoys a public park, it does not diminish the ability of others to enjoy it. In contrast, a private good is rivalrous, meaning that one person’s consumption directly affects the quantity available for others (e.g., a sandwich is consumed by one person, leaving less for others).
- Non-excludability refers to the fact that it is difficult or impossible to exclude anyone from using the good, even if they don’t pay for it. A classic example of a public good is clean air. No one can be excluded from breathing the air, regardless of whether they contribute to its cleanliness. This contrasts with private goods, where individuals can be excluded from access (e.g., by charging for entry to a concert).
Due to these characteristics, public goods lead to what is known as the “free rider problem,” where individuals may benefit from the good without contributing to its cost. Since public goods are available to everyone, including nonpayers, they often lead to underproduction or overuse without government intervention.
Why other options are incorrect:
- a. is characterized by rivalry and excludability: This describes a private good, not a public good.
- b. produces no positive or negative externalities: Public goods often generate externalities (positive or negative), but the defining characteristic is non-excludability and non-rivalry.
- c. has no opportunity costs: This is inaccurate because public goods also have opportunity costs, such as the resources used to provide them, which could have been allocated elsewhere.
Thus, d is the correct answer, highlighting that the benefits of public goods are available to all, even those who do not contribute.