This document discusses different types of goods and market failures related to them. It defines public goods as non-excludable and non-rival, meaning many can use them without reducing availability. This leads to free-riding issues where private markets fail to provide enough. Common resources are rival but non-excludable, so overuse is likely without regulation. Governments use cost-benefit analysis to determine whether and how to provide public goods or regulate common resources to remedy market failures.

1. 11 Public Goods and Common Resource

10. Figure 1 Four Types of Goods Copyright © 2004 South-Western Rival? Yes Yes No Private Goods Natural Monopolies No Excludable? Common Resources Public Goods • Ice-cream cones • Clothing • Congested toll roads • Fire protection • Cable TV • Uncongested toll roads • Fish in the ocean • The environment • Congested nontoll roads • Tornado siren • National defense • Uncongested nontoll roads

15. CASE STUDY: Are Lighthouses Public Goods?