Public goods, and costs or benefits that fall on others

Grade 12 Social Studies Worksheet - Building Confidence

Circle the best answer.

1. Read this first

   Use this

   Cards A and B on kinds of goods (card A is in our words; card B is made up). Card A, "Four kinds of goods". Who made it: written for this sheet. Summary in our words, not a quotation: A good is excludable if people who do not pay can be kept from using it. A good is rival if one person's use leaves less for others. A private good is excludable and rival. A public good is neither. A common resource is rival but not excludable. A club good is excludable but not rival until it gets crowded. Card B, "Five goods (made up)". Who made it: written for this sheet. Good 1: the beam of a lighthouse that every ship can see. Good 2: a sandwich sold at a counter. Good 3: a lake open to any fisher, where each fish taken leaves fewer for others. Good 4: a film streamed to paying subscribers, where any number can watch at once. Good 5: a toll bridge that is nearly empty.

2. 1.

   Tala sorts Good 1, the lighthouse beam, using card A. Which kind of good is it, and why?

   • A private good: ships that do not pay can be kept from the light, and each leaves less
   • A club good: ships can be kept from the beam, but one ship's use leaves as much for the next
   • A common resource: ships cannot be kept from the beam, and each ship that uses it leaves less
   • A public good: no ship is kept from the light, and one ship's use leaves the next as much
3. 2.

   Milo sorts Good 3, the open lake, using card A. Which kind of good is it, and why?

   • A private good: the lake belongs to the fishers, so a fish taken leaves fewer for others
   • A common resource: any fisher can use it, and each fish taken leaves fewer for others
   • A club good: fishers who do not pay can be kept off, but fish taken leave as many for others
   • A public good: any fisher can use it, and fish taken leave as many for the next fisher
4. 3.

   Pia reads Good 5, the nearly empty toll bridge, beside card A. Which claim fits best?

   • It is a common resource, since a bridge is rival whenever a car crosses and open to any car
   • It acts like a club good now, and may become rival if it gets crowded
   • It is a public good, since a bridge is shared and cars do not use it up
   • It is a private good, since a toll keeps people off and each car uses the bridge up

5. Use this

   Cards A and B on a cost that falls on others (card A is in our words; card B is made up). Card A, "Externalities". Who made it: written for this sheet. Summary in our words, not a quotation: An externality is a cost or benefit that falls on people who are not part of a deal. When a market ignores an external cost, too much of the good is made. When it ignores an external benefit, too little is made. Card B, "A paper mill and a river town (made up)". Who made it: written for this sheet. Summary in our words, not a quotation: The mill's own cost of making one ton of paper is $40. Its waste costs the river town $10 for each ton. Buyers will pay $60 for the first ton and less for each further ton. The last ton the mill sells brings in $45.

6. 4.

   Ren adds the mill's cost and the town's cost on card B. What does one ton of paper cost everyone?

   • $40 a ton: the cost that the mill itself pays to make paper
   • $10 a ton: the cost that falls on people outside the sale
   • $50 a ton: the mill's $40 plus the town's $10
   • $60 a ton: the price that buyers will pay for the first ton of paper
7. 5.

   Zee asks whether the mill makes too much paper. Which fact on card B shows it?

   • The last ton brings in $45, above the mill's $40 but below the $50 cost to everyone
   • The mill's cost is $40, so the mill makes a profit on the last ton it sells at $45
   • The town's cost is $10, which is less than the $45 the last ton brings in for the mill
   • The first ton sells for $60, which is above the $50 cost to everyone, so it is worth making
8. 6.

   Noah writes one claim from cards A and B. Which claim do the cards support best?

   • The mill makes less paper than is best for everyone, because it ignores the town's $10
   • The mill makes more paper than is best for everyone, because it ignores the town's $10
   • The mill should shut down, since the town's cost makes every ton worth less than it costs
   • The mill makes the right amount, since buyers pay more than the mill's own cost

9. Use this

   Cards A and B on paying for a shared show (card A is made up; card B is in our words). Card A, "A fireworks show (made up)". Who made it: written for this sheet. Summary in our words, not a quotation: A town park fireworks show costs $600. The 100 households near the park each value it at $9. A fundraiser asks each household for $6. Anyone can watch from the park, whether or not they paid. Card B, "Free riders". Who made it: written for this sheet. Summary in our words, not a quotation: A free rider enjoys a good without paying for it. A public good is one that people cannot be kept from using and that is not used up by sharing.

10. 7.

    Kira compares the show's cost and value on card A. Is it worth holding?

    • Yes: the households value it at $900 in all, which is more than the $600 cost
    • No: each household values it at $9, which is less than the $600 cost
    • No: a show that anyone can watch has no market value, so it cannot be worth holding
    • No: the fundraiser asks $6 each, which is more than half of what a household values it at
11. 8.

    Esme asks why a voluntary fund may not reach $600. Which reason from cards A and B fits?

    • A household can watch free whether or not it pays, so each is tempted to be a free rider
    • A household values the show at $9, which is more than the $6 asked, so many will refuse
    • The show costs more than it is worth, so households are right to refuse the fund
    • A fundraiser cannot find 100 households, since the park is open to the public to enter
12. 9.

    Bo considers a $6 charge on every household. What does it raise, and how is each household left?

    • It raises $900, and each household is $3 better off, since each pays $6
    • It raises $600, and each household is $3 better off, since the show is worth $9 to it
    • It raises $600, and each household is the same as before, since the show is free to watch
    • It raises $600, and each household is $3 worse off, since each pays $6 for a $9 show
13. 10.

    Ari writes one claim from cards A and B. Which claim do the cards support best?

    • The show should not be held, since a voluntary fund raises less than the show costs
    • The show cannot be held, since public goods are not made by anyone in a market economy
    • A voluntary fund will raise $600, since each household values the show above the $6 asked
    • The show is worth holding, but a voluntary fund may miss $600 because of free riders