Question

Provide two examples of goods/services that are classified as private goods/services even though they are provided by a federal government.

Short answer

Two examples of private goods/services that can be provided by a federal government are: 1. National Postal Service: Postal services, like the USPS (United States Postal Service) in the United States, are considered private goods because they are excludable (only those who pay for postage can send mail) and rivalrous (each letter or package delivered consumes resources). Despite being provided by the federal government, USPS operates on a fee-for-service basis, making it a private good/service. 2. Student Loan Program: The Federal Direct Student Loan Program in the United States provides loans to students for higher education, making it a private good/service as loans are excludable (borrowers must apply for and qualify to receive them) and rivalrous (the funds provided for a loan to one student makes them unavailable to others). Although operated by the government, the loan program functions similarly to private student loans.

Step-by-step solution

1. Definition of Private Goods/Services

Private goods/services are characterized by two main properties: excludability and rivalry in consumption. Excludability means that individuals can be easily prevented from using the good/service if they do not pay for it. Rivalry in consumption means that one person's consumption of the good/service reduces the amount available for others to consume. In contrast, public goods/services are non-excludable and non-rivalrous, meaning they are available to everyone regardless of their ability to pay and one person's consumption does not reduce the availability for others.

2. Identify Two Examples of Private Goods/Services Provided by Federal Government

While private goods/services are primarily provided by private entities, there are situations where federal governments may also provide such goods/services. Two examples of private goods/services that can be offered by a federal government are: 1. National Postal Service: Postal services are generally considered private goods because they are excludable (only those who pay for postage can send mail) and rivalrous (each letter or package delivered consumes resources). However, postal services can be provided by the federal government, as demonstrated by the USPS (United States Postal Service) in the United States. 2. Student Loan Program: Providing loans to students for higher education is another example of a private good/service that can be provided by the federal government. Loans are excludable, as borrowers must apply for and qualify to receive them, and they are rivalrous, as the funds provided for a loan to one student makes them unavailable to others. In the United States, the government operates the Federal Direct Student Loan Program to provide loans to eligible students.

3. Explanation of the Examples

1. National Postal Service: In the case of the United States Postal Service (USPS), it is a federal agency providing postal services, which are typically classified as private goods. USPS operates on a fee-for-service basis, charging customers for postage and other delivery services, making it excludable. It is also rivalrous, as the delivery of one mail item utilizes resources that could have been used to deliver other items. Therefore, despite being provided by the federal government, postal services through USPS can be classified as private goods/services. 2. Student Loan Program: The Federal Direct Student Loan Program operates similarly to private student loans, as the funds are excludable and rivalrous. Applicants must demonstrate eligibility and financial need to qualify for federal loans, and the amount that can be offered is limited by the total funding available from the federal government. As such, the federal student loan program provides a private good/service even though it is operated by the government.