What are the possible positive or negative externalities associated with common goods public goods and natural monopolies?

Answer 1

First, we will define some characteristics:

Rival goods are those that are consumed in the process of being used - thus one person's use inhibits that of another.

Exclusive goods are those that can be rationed - people can be kept from using them unless they pay.

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Private goods are rival and exclusive. An example would be a turkey sandwich - I have to pay to eat it, and once I've eaten it, you cannot as well.

Pure public goods are non-rival and non-exclusive. An example would be general knowledge. The knowledge itself is non-exclusive (though the medium of transmission may be), and the learning of additional people of some principle does not diminish its usefulness to others.

Natural monopolies (or impure public goods) are non-rival but exclusive. An un-congested toll road is a good example - individuals must pay to use it, and additional use does not hinder the use of others. Broadcast cable signals are another example.

Common goods (or resources) are rival and non-exclusive. People cannot be kept from using it, but additional use hinders the utility each individual gains. Examples include the environment and congested freeways.