Question

Use the distinction between the characteristics of private goods and public goods to determine whether the following should be produced through the market system or provided by government: (a) French fries, (b) airport screening, (c) court systems, (d) mail delivery, and (e) medical care. Explain your answers.

Short answer

1. Market system as this has features of a private good.

2. Government as this has features of a public good.

3. Government as this has features of a public good.

4. Government as this has features of a public good.

5. Market system as this has features of a private good

Step-by-step solution

Meaning of a private and a public good 

A private good has rival consumption, which means if one person consumes a unit of a private good, the others will not be able to consume the same unit of that good. The producer of a private good can use a price mechanism to exclude people. Thus, the market system should provide these goods.

For example, a bag of chips is a private good because it costs money to purchase this good. All the people who can pay the price (say $1) will be able to enjoy the benefits of this good, and others will be excluded. Also, if one bag of chips is consumed by one customer, others will not be able to consume that particular bag of chips.

A public good has non-rival consumption, which means if one person consumes a public good, the others will still be able to consume the good. People simultaneously can consume the public good. The producer of a public good cannot charge prices, and therefore, the exclusion is not possible, which leads to the free riders. Thus, the government should provide these goods.

For example, national defense is a public good, no one can be excluded from using it, and the use of one person does not reduce the availability for other people. People can benefit by using the good simultaneously.

Explanation for part (a)

French fries have both rival and excludability features of a private good.

• A person can only consume french fries if they pay for them.

• If one person consumes french fries, it affects the consumption of other people by decreasing the available quantity.

Thus, it should be provided by the market system as there is a possibility to earn profits.

Explanation for part (b)

Airport screening has both non-rival and non-excludability features of a public good.

• All those who are at the airport will get the benefit of watching screening without even paying.

• All the people can watch the screening simultaneously. The consumption by one will not reduce the availability of screening for others.

Thus, it should be provided by the government as the market has no incentive to provide this public good.

Explanation for part (c)

The Court system is a part of the constitution of any nation that ensures fairness injustice. People are not excluded by charging prices for various procedures and are provided with resources to ensure equal treatment. The consumption of such services is not restricted and is available for all. There is no rivalry in consumption either.

Thus, the court system should be treated as a public good and therefore should be provided by the government.

Explanation for part (d)

The mail delivery system is a private good, and accordingly, should be provided by the market system. One can exclude people from getting their mails if they haven’t paid for it, and the time spent on providing delivery to one person reduces the available time for the other.

Given the above, from the point of view of equal access to information and promoting society’s welfare, the government should provide it. Therefore, a mail delivery system can be provided by both the government and the market system.

Explanation for part (e)

Medical care is a private good, and accordingly, should be provided by the market system. One can exclude people from getting medical services by charging money for such services. Also, the consumption of one reduces affects the consumption by the others.

However, given the above features, equal access to healthcare demands the government to step in for the people who cannot afford medical services. Therefore, healthcare can be provided by both the government and the market system.