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The Differences between Private Goods, Public Goods, Natural Monopolies, and Open-Access Goods
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Public are goods whose benefits are indivisibly spread within the entire community. This depends on whether or not one desires to purchase the good. Provisions of public good in most cases often require government actions (Mceachern, 2008). On the contrary, private goods are goods that can be divided up and provided separately to different individuals. This division provides no external benefits or costs to parties that are not involved. Efficient provision of private goods can efficiently be allocated by markets.
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The security of a public good lie on the national defense this therefore means that there is nothing more vital to the society than its security. As an economic good, national defense differs completely from a private good (Mceachern, 2006) For example you find that a bucket of fat can be divided up in many ways among individuals. In other situations once divided, others cannot get what you have. On the contrary, national defense, once provided, will have the same affect on everybody. It does not matter whether one is poor of rich, militarist or pacifist, young or old, or ignorant or learned (Mceachern, 2006). They will all receive the same amount or number of national security from the Army. It is evident therefore that the decision to provide a certain level of a public good i.e. national defense leads to a number of army soldiers and tanks to protect every one in a state. By contrast the decision to use a private good like a bucket of fat is an individual act. It can be used in anything so long as it interests the consumer.
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A natural monopoly is a condition where the cost-technology in an industry is most efficient. It involves the cheapest long-run average cost of production that is concentrated in a single form of good. In most cases, the lowest value gives the largest supply in an industry (Mceachern, 2006). The resultant good is often the first to be supplied in the market. This gives an industry or a firm an overwhelming cost advantage over actual and potential competitors. For example in an industry, the capital costs may predominate to a level where economies of scales are large in relation to market size. This would result to high barriers to entry for example in public utilities such as electricity and water.
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Open access means access to everything. For instance in cases where free market economies dominate the world economic order, the dominance would throw a sharp relief into the importance of sustainable economic growth of goods. Such goods lie beyond an immediate remit of the market (Mceachern, 2008). These items would not be directly incorporated in the pricing structure and thus gives the feature of a marketed good. In this case the smooth and sustainable operation of the market will depend on the correct management and valuation of non-market goods provided free as a public good or by the environment. The broad category here therefore includes a diversity of goods variety that range from recreation in open-access wilderness areas, health and safety improvements (Mceachern, 2008). It also includes resources such as the global climate system, the ozone layer and clean water where one can access without restriction. Open access goods are goods and resources that determine the quality of life and upon which the sustainable continuance of life and the market system depends.
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Reference
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McEachern, W. A. (2008). Economics: A Contemporary Introduction. Cengage Learning
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Publisher
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Mceachern, W. A. (2006). Contemporary Economics. Cengage Learning Publisher
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