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Assigment 3 and 4 - Assignment Example

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Positive externalities are differences between private and social advances. An example is research and development and do not include compensation of indirect beneficiaries. With that, private returns are negligible than social returns. Public goods can either be…
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Assigment 3 and 4
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Download file to see previous pages The high demand for the free goods affects the demand that the markets are able to supply. Non payers are not able to be prohibited in using the goods. Market failures are common in provision of public goods. When there is no payment of goods, revenues are not earned from the goods that are produced hence the market is not able to produce more. Government distortion is common in production of public goods through production subsidizing and protection of intellectual property inadequately (Hubbard and Anthony, 51). When the interference occurs, the market is not able to earn revenues and profits from the goods produced. This leads to market failure. Government intervention leads to protection of goods in a market and other firms are not able to enter easily into the markets.
5. Free rider problem occurs when a consumer is in a position of enjoying a good or service without paying for it. Marketers providing public goods have successfully used a number of techniques to encourage those who use the products to contribute to them (Hubbard and Anthony, 67). In the techniques used, they give contributors private goods, arrange matching contribution for them and appeal to the sense of civil and moral responsibility. Solutions are as follows:
Common in public and beautiful sceneries those citizens are ready to access through payments. Limiting entrance for such areas may make them private. This is common in sectors that are on high demand in an economy in general.
Citizens are beneficiaries of services from the government such as defense. They pay for this indirectly through taxation. Though some taxpayers complain, this remains one of the best ways of making the economy of a country flow steadily.
6. Poverty trap is a mechanism that forces people to remain below the poverty line. It is common in under-developed and developing countries (Hubbard and Anthony, 83). The main causes of the poverty trap are inadequate credit to citizens and ...Download file to see next pagesRead More
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