Question

5. Common resources versus private goods

Spring is here, and Sharon and her grandfather would like to go fishing for the weekend in Florida. Sharon could either go to the river in town where anyone can fish without a permit, or she could drive up to a stream located on her family's property in the countryside to fish. Assume that, no matter where people fish, all of the fish that are caught would be kept (that is, there is no "catch and release" policy).

The fish in the river are considered (nonrival in consumption; rival in consumption) and (excludable; nonexcludable) whereas the fish in the private stream are (nonrival in consumtion; rival in consumption) and (excludable; nonexcludable) . In other words, the fish in the river are an example of (a public good; a private good; a common resource; a club good), and the fish in the private stream are an example of (a public good; a private good; a common resource; a club good).

Fishing in the river will likely lead to (moral hazard; the Tragedy of the Commons; the free-rider problem) because of which of the following reasons?

____ Nobody will enjoy fishing because of the lack of private contributions to the maintenance of the river.

____ Anyone can fish in the river, and one person's fishing activity decreases the ability of someone else to fish with success.

____ All fishermen will choose to fish in the stream believing that there are more fish there.

____ All fishermen will choose to fish in the river because of the limited access to the stream.

Answer 1

The fish in the river are considered ( rival in consumption) and ( nonexcludable) whereas the fish in the private stream is ( rival in consumption) and (excludable).

In other words, the fish in the river is an example of ( a common resource; ), and the fish in the private stream are an example of ( a private good;).

Fishing in the river will likely lead to (the Tragedy of the Commons) because

Anyone can fish in the river, and one person's fishing activity decreases the ability of someone else to fish with success.