Wednesday, March 7, 2012

Public or Private?

One of the questions we look at in Prin. of Microeconomics is whether a good or service should be privately or publicly produced. This is a question the state of New Mexico is asking in terms of the space tourism port that is being built in southern New Mexico. Initially the New Mexico state government was building the space port, but now the government is looking to privatize the space port. Economically, the question revolves around two issues: excludability (whether potential consumers can be prevented from consuming) and rivalry in consumption (whether one consumers consumption reduces another consumers consumption). If one cannot exclude consumption and the good is not rivalrous in consumption, then the good is a public good, and from an economic perspective is best produced by a government - assuming that the marginal benefits of production are greater than or equal to the marginal costs of production.

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