Question

Do you think that private markets for water quality would result in an efficient level of investment in water quality improvements? Why or why not? Make sure you refer to the characteristics of a public good and how it relate to groundwater quality.

Subject: natural resources economics

Answer 1

The charateristic of public good is that it is non rivalrous and non excludable. This means that no person can be excluded from its use and if one person uses it, use for the other will deplete. Groundwater has all these qualities and Hence it is a public good. the public good are managed by the government and it ensures that the distribution and allocation is efficient. if the private markets take up the responsibilty of managing the groundwater, they will look after the maximisation of profits rather than focusing upon the efficient level of output. the goundwater will then become excludable and rivalrous and the person will be charged greater upon the use. Those who will not be able to pay will be excluded which is not possible in case of water. Thus this management cannot be effective when managed by private market.