Posted by Lisa on .
Identify similarities and differences between common goods, public goods, private goods, and natural monopolies. Provide an example of each type of good and justify your answers. Discuss possible positive or negative externalities associated with each example. How do the externalities affect the economy
Your terminology is confusing.
Do you mean "private and public goods" (i.e. owned property)or "the private and public good" (i.e well being) ?
How do you define a "natural" monopoly as opposed to an unnatural one?
common good -- fish in the river. The fish are available to anybody who wants to go after it.
public good -- A park - Something where nobody can be excluded, each person can enjoy as much as he/she wants.
private good -- A burger at Wendys. The owner gets full and sole consumption
Natural Monopoly -- Water and sewer. A natural monopoly occurs when the "product" has declining average costs for all reasonably possible levels of production. Often because they require huge amounts of fixed capital. Because of the declining average costs, the firm will naturally squeeze out any competitors; the firm can always offer the product at a lower cost.
Public and common goods have congestion problems. For private goods, the owner doesnt necessarily bear he costs of, say, the pollution generated when making the good. Natural monopolies often irk people off with their motto "we don't care, we don't have to"