Two characteristics associated with public goods are non-rivalry and Group of answer choices overproduction high prices prohibitive costs of excluding non payers from consumption the use of free resources in production
The correct answer and explanation is:
Correct Answer: Prohibitive costs of excluding non-payers from consumption
Public goods are defined by two key characteristics: non-rivalry and non-excludability. Non-rivalry means that one person’s use of the good does not reduce the amount available for others. For example, if one person enjoys a fireworks display, it does not prevent others from enjoying it too. Non-excludability refers to the inability or impracticality of preventing individuals who have not paid for the good from consuming it.
Because of this second characteristic, it becomes prohibitively costly or even impossible to exclude non-payers from accessing the benefits of the good. This is often referred to as the “free rider problem.” Individuals may have little incentive to pay for the good since they can benefit from it without contributing to its cost. As a result, private firms may be discouraged from providing such goods, leading to underproduction or reliance on government intervention.
Examples of public goods include national defense, clean air, public parks, and street lighting. Trying to charge every individual who benefits from national defense or a lighthouse is practically and economically unfeasible. Enforcement would be too complex and expensive. This leads to a situation where the government or a non-profit organization often provides the good, using tax revenues or donations, in order to ensure its availability.
The other choices are incorrect for the following reasons:
- Overproduction is typically not associated with public goods; instead, underproduction is the concern.
- High prices do not characterize public goods since they are often provided free or funded by taxes.
- The use of free resources in production is not a defining characteristic of public goods, as it pertains more to the inputs used than to the nature of the good itself.
Hence, the defining characteristic besides non-rivalry is the prohibitive cost of excluding non-payers from consumption.