Question

If the land where the park might be built were private property and the owner of the land could charge admission, what size park would the owner of the land build? Explain why the size of the park under private property will differ from when the park is a public good.

Answer 1

If the park becomes private property then it depends on the profit motive of the owner and thus the size of the park in such a situation will depend on the solution to the profit maximization problem that the owner undertakes. This will be a smaller size as compared to a public good as now the aim is to make the size of the park cost effective. The overall size of the park will be smaller. The reason for this would be that now the maintenance costs of the park would be borne by the private owner and so he would seek to enhance his profits whereas previously it would be consumed entirely by the government.