Compare and contrast public goods, private goods, common resources, and natural monopolies.
A public good is a good or service which is non-excludable, and which has no rivalry. It is financed through taxation, and is available to all. Its consumption does not reduce the amount available to others, and it is available even to those who don’t pay for it. Some examples of private goods may include national defense and law enforcement. A private good is a good or service which, if consumed, may not be available to others. This makes it excludable, and it is usually financed by private firms. Private goods are almost exclusively made for profit, and there is rivalry involved in obtaining the product or service. Private goods can include clothing and food. A common resource is a good or service which provides users with tangible benefits. Like public goods, these goods are non-excludable, but they are rival. They include things that every person has a right to use, and could also include things in which people contribute to the production of. This may include items in which the public has paid for the production of through taxation. They are goods such as water and public parks. To the disadvantage of everyone, overuse of common resources may lead to destruction of that resource over time. A natural monopoly occurs when a company has a large cost advantage over other competitors in the market. Like private goods, a natural monopoly is exclusive, but has no rivalry. The government is able to regulate the natural monopolies, which ensures that people are charged a fair price. Utility companies would be considered natural monopolies.
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