Natural monopolies?

Question

Identify similarities and differences between common goods, public goods, private goods, and natural monopolies. Provide an example of each type of good and justify your answers. Discuss possible positive or negative externalities associated with each example. How do the externalities affect the economy?

Answer 1

Common goods: goods that are non-excludable (you can't prevent a specific person from partaking) and rival (one person using the good diminishes its quality for others).  An example is a common pasture.

Public goods: goods that are non-excludable and non-rival (there is no marginal cost to accommodate additional people)  An example is national defense.

Private goods: excludable and rival.  An example is an ice cream cone.

Natural monopolies: tend to require a lot of investment to get it working, but after that have low marginal cost.  The investment is so great that it is inefficient to have more than one firm do it.  An example is telephone lines.

Externalities:

common goods: since no one can be excluded, the resource tends to be used up fast,  because everyone faces the choice to use it now or have someone else use it.  This has affected economies in areas such as fishing, where the fish population is very low.  Solutions have been to regulate the amount each person can use, or to give people an ownership stake in an area of land.

public goods: free rider problem, it's impossible to run privately because you can't exactly paint a target on someone's house saying "it's ok to attack this house."  These types of goods tend to be run through the government, and the effect on the economy is taxes.

Private good: can be sold in competitive markets, no externalities inherent to the type of good

Natural monopoly: since it's a monopoly, the firm can set the price unreasonably high.  This can be bad for the economy, because it forces people to pay higher prices, and we have experienced this with Ma Bell in the '80s.  Many natural monopolies in essential goods, such as water, are to some extent regulated by the government.

Answer 2

should i budge?

well, mmm.........................

natural monopolies r those which r operating on the dimminishing part of their long run average cost curve,........

something that puts  off  their competitors and forces them to charge h igher prices, also note if govt. regulate prices based on m.c., such a veenture may not be possivble, which led to some closures also, ya but daanajan was right most r xploitative, examples? well opec or de beers

common goods r public goods like parks, pvt. goods have ,property rights, soln to market failure in case of common goods,house

common and public goods,  trgedy of commons, which may be associated with an externality, negative exernality ,(but is not externality per se, by defn., non-excludability) in which rash usage is made

the other examples listed -- hididng preferences, free rider problem etc. are market failures relating to, but not externalities.in natural monopoly all in my mind is abuse of market power, a dead weigght loss not for inefficiency but 4 high prices and phenomenon such as lobbying

note externalities, by defn. deal with pvt. goods see i a honey farm and u an apple orchard , dont mind, but every season my bees go and pollinate ur orchard!

it's a positive externality,

say i love jazz  and my friend soumyaudi listens to louis armstrong gramaphones, i sit and i enjoy, positive externality, but some one listens to dull rock blasts personally i suffer, negative externality, again plants throwing wastes into water, my fisheries suffer, negative, i resort to ownership right--- litigation, ownership,takeover or other more complex manipulations...... externalities say that there will be always some external factors not owned, neither under our direct control which affect our work, there r other xamples also like assymetric information etc.