Costs and Public Goods

Public good is an item whose consumption is determined by society not by individual consumers. Examples include national defense, law enforcement, parks. These goods are financed by taxes because they are created for the welfare of public. Basically the goods which can be consumed without reducing its availability to other individual and the other one is not excluded are public goods. The vice versa of these goods are private goods. A private good is a product that must be purchased to be consumed and its consumption is done by one individual. For instance, candies: the person who would be purchasing them , would be having not the person did not purchased.

Public goods have characteristics of non-rival and non- excludable. The former entails that one person's "consumption does not affect another's consumption of a good; the latter conveys that one individual "cannot prevent another from consuming a good" (EconPort.org. N.D. PP. 1). Conversely, a private good is both rival and excludable. An individual owns their good, not everyone can own the same good (rival), and each individual can exclude others from using that good (excludable). Mixed goods are hybrids of public and private: Common Pool Resource goods display the rival elements but are non-excludable, while Club Goods contain the non-rival element but are excludable (EconPort.org. N.D. PP. 1).

Total variable cost is the overall expense related with producing or providing a service changes in direct proportion to the quantity provided. For instance, although the Central Market building is a fixed cost, maintenance for the building such as cleaning requires labourers which add to the costs. These additional costs are referred to as total variable costs.

What are the constraints and opportunities implicit to this situation? It is very rare that resources are not a constraint, and allocations must be made on the assumption that not enough will be available to please

1) Suppose you are to specify a short-run production function for dental services. What inputs might you include in the production function? Which would be variable inputs and which are fixed inputs?

The demand for pasta, prompted AIPC to increase its production, order more raw materials - a variable input. The same applies to labor, but the plants and the equipment on the other hand, would be the fixed input.

Public goods have two distinct aspects: nonexcludability and nonrivalrous consumption. “Nonexcludability” is defined as the” cost of keeping nonpayers from enjoying the benefits of the good or service is prohibitive.” An example of such would be an entrepreneur who has a fireworks show. There are people who are able to view the show from their homes; window and backyard. Because the entrepreneur is unable to charge for consumption, the fireworks show may go unproduced, even if the is a high demand for the show.

Fixed costs are those expenses that are necessary to be paid by a company, independent of any business activity that is does. It is one of the two components of the total cost of a good or service, along with variable cost. Fixed costs are not fixed permanently; they change over time, but they are fixed in relation to the overall production quantity for the relevant period. For example, a company may be having unexpected expenses not related to production; and warehouse costs and costs like that are fixed only over the time period of the lease.

Ans: An economic term that encompasses a situation where, a common resource in any given market, the quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers. This is a direct result of a lack of certain economically ideal factors, which prevents equilibrium (Market Failure 2013). Market failures have negative effects on the economy because an optimal allocation of resources is not attained. In other words, the social costs of producing the good or service (all of the opportunity costs of the input resources used in its creation) are not minimized, and this results in a waste of some resources. Market work well when prices reflect all values.

Public goods are goods that are neither excludable, nor rival in consumption. Excludability means the extent the consumption of a good is limited, while rival refers to the extent the consumption of a particular good limits the consumption of others who wants to consume that particular good. However, some goods do not have both characteristics these goods are called pure public goods, meanwhile others have either of the characteristics, they can be referred to as, club goods, local public goods, common resources. Also, some goods are characterized as rival and excludable in consumption, these goods are called private goods. Also, clubs goods, local public goods are refers to as quasi-public goods, although they may seem as public goods there very nature are not pure public goods. This paper will focus more on public goods, as it will be used to explore the under supply of public goods provision (Mcnutts 1991,930). The prominent characteristics of club goods is its excludability factor, which might signify unequal distribution of the club goods, however, the club goods can be said to be somewhat rivalrous as shown in table 1, this is because club goods can create a sense of rivalry for individuals outside the club. Moreover, for individuals inside the club there might be rivalry in consumption when a point of congestion is reached. The club theory proposes several solutions to enhance the optimal provision of the club good, which includes membership fees (Bchir

VARIABLE COSTS:- A variable cost is a changing cost. In case of any changes the cost of the product changes. For example, the cost paid to a casual worker may vary. More hours done by the worker will pay him well

- "Variable costs" are costs which will increase or decrease over a given range of activity.

Variable costs are those that change with the level of productions i.e. the total variable cost increase when more units are produced and vice versa. Semi-variable costs have properties of both fixed and variable costs due to presence of both variable and fixed components in them. An example of

Public good which are been consumed by an individual does not reduce the amounts available for another person to consume. For example flood control system, national defines services and water suppliers. That is something non rival and non-excludable. Non-rival means if one person consume the good it can be still available for other person to consumer for instance radio station if Mr. Shah is listening to radio station at same time other person can also listen to it.

(f) The Efficiency Principle: This principle implies that efficiency must be applied in the allocation of resources