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Author Question: Why is it difficult for the market to deliver socially efficient quantities of goods like clean air ... (Read 62 times)

EY67

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on: Jun 29, 2018
Why is it difficult for the market to deliver socially efficient quantities of goods like clean air or street lighting?
 
  What will be an ideal response?

Question 2

What is rule of reason?
 
  What will be an ideal response?


SomethingSomething

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Goods like clean air and street lighting are public goods. This means that individuals can consume these goods even without paying for them as they are non-rival and non-excludable. Such goods present particular problems for markets to provide because consumers have an incentive to act as free-riders; they can consume public goods even if they do not pay for them. Therefore, the problem with efficiently providing public goods is that consumers aren't willing to pay for them because no one can be excluded from consuming them once they are provided.

Answer to Question 2

Rule of reason is the criterion introduced by the Supreme Court in 1911 to determine whether a particular action was illegal (unreasonable) or legal (reasonable) under the terms of the Sherman Act.


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