The text says that both non-rival and non-excludable public goods involve externalities.
a)Are the externalities associated with nor-rival public goods generally positive or
negative? Use examples in your answer. Is the free-market quantity of nor-rival public
goods generally greater or less than the efficient quantity?
b)Are the externalities associated with non-excludable generally positive or negative?
Use examples in your answer. Is the free-market use of non-excludable public goods
generally greater or less than the efficient use?
a) The externalities associated with non-rival public goods are generally positive. Examples of non-rival public goods include clean air, national defense, and public parks. These goods are non-rival because one person's use of the good does not reduce the amount available for others. The free-market quantity of non-rival public goods is generally less than the efficient quantity because the free-market does not take into account the positive externalities associated with the good.
b) The externalities associated with non-excludable public goods are generally positive. Examples of non-excludable public goods include public roads, public education, and public health services. These goods are non-excludable because it is difficult to exclude people from using them. The free-market use of non-excludable public goods is generally less than the efficient use because the free-market does not take into account the positive externalities associated with the good.