• Public good has 2 characteristics: Non-Excludabilty and Non-Rivalry. Examples: National Defence, Overhead bridges, Traffic Lights.

• Non-Excludability give rise to Free-Rider Problem.
• Since the demand for consumers are not shown, it results in a Missing Market.
• As firms tries to maximise their profits, no firms are willing to invest in the sector.
• This results in no allocation of resources.

• Non-Rivalry results in zero marginal cost of admitting another user.
• This results in socially ideal price to be zero. Where, MSB=MSC.
• No allocation of resources occurs as firms are profit motivated.

• Solution: Direct Provision, financed through taxes.

• Market Dominance/Monopoly, results in benefits of perfect competition not reaped.
• Thus, its inefficient and inequiable.

• To maximise profits, dominant firms supply at a quantity lower than market equilibrium.
• This results in Price to be greater than Marginal Cost (P>MC)
• Underallocation occurs, allocative efficiency not achieved.
• Large firms earn excessive profits, which goes to shareholders. Inequity occurs.

• Solutions: Taxation, Legislations, Direct Provision, Competition Policies, Maximum Price.

Here are the questions, start posting!

1. Since Mircosoft enjoys monopolistic power in the PC operating systems market, can it set as high a price as it likes for its internet browser? In what ways do you think that Microsoft might be inefficient?
2. Can you suggest cases of monopolistic power in the Singapore context? Explain your choices.

Here are some websites, hope that they will be helpful!

1. http://money.cnn.com/1999/11/05/technology/microsoft_finding/
   
2. http://news.bbc.co.uk/2/hi/business/507039.stm
   
3. http://news.bbc.co.uk/2/hi/special_report/1998/04/98/microsoft/80303.stm
   

Study Hard for the Upcoming CE! and Happy Labours' Day!

Zhen Qiang