QUESTION 1
Use the distinction between private and public goods' characteristics to
determine whether they should be produced through the market system
or provided by the government.
a) Ice cream,
b) Airport security system
c) Courts and tribunal system
d) Sanitisation & disinfection services; and
e) Recreational park
Tabulate and explain your answers.
Private Goods: Goods that are sold by
firms to earn profit and to fulfill the
needs of buyers.
What are
Public Goods: Commodities or
private goods
services that are provided by the
government, which will benefit all the
and public
members of society.
goods ?
Market system /
Public Goods / Private Goods
Government
Private Goods:
- Rivalry Produced by the market
1. Ice cream
system
- Excludability
Public Goods:
- Nonrivalry
2. Airport security
- Non-excludability Provided by government
system
- Free rider problem
Market system /
Public Goods / Private Goods
Government
Public Goods:
- Nonrivalry
3. Courts and
Provided by government
tribunal system - Non-excludability
- Free rider problem
Private Goods:
4. Sanitization and
- Rivalry Provided by the market
disinfection
system
services
- Excludability
Market system /
Public Goods / Private Goods
Government
Public Goods:
- Nonrivalry:
5. Recreational Provided by
Park - Non-excludability government
- Free rider problem
QUESTION 2
The Management Office for Greenville Condominium is facing
problems in getting maintenance fees from a group of
residents. These errant residents enjoy various benefits and
facilities provided in the condominium regularly paid for by
other residents.
Public Good
A commodity or service that is made
available to all members of a society
Elaborate on this
Characteristics of The Public Good
issue from a
All residents of the condominium, both those who pay
1. Non-rivalry
and those who do not pay the maintenance fee, can use the
public good public facilities as they are non-excludable.
perspective 2. Nonexcludability
All residents of the condominium, both those who pay
and those who do not pay the maintenance fee, can use
the public facilities as they are non-excludable.
Elaborate on this issue from a
public good perspective
Free Riders Problem
People can benefit from a good or service without paying anything
towards it.
Resources, goods and services may be overprovided.
The other residents will not pay the maintenance costs.
The low or even zero demand causes management impossible to
collect enough maintenance fees.
Putting residents' benefits at risk.
What would you suggest to the Management
Office to resolve the outstanding payments?
1. Send Letter of Demand (LOD) to defaulters
Deliver a written notice requiring unit owners to pay their dues within 14 days.
2. Limit the amenities available to the defaulters on the property
The condo association's rules should specify the features and amenities to
which access may be restricted.
3. Post names of defaulters in public
The management has the power to display a list of defaulters along with the unit
number and outstanding balance.
What would you suggest to the Management
Office to resolve the outstanding payments?
4. Suspend passcard access on turnstile or entranceway
The management has the power to deactivate the electromagnetic access device
of defaulters
5. Enter the defaulter’s unit without permission and confiscate their things
Management corporation can confiscate any of the defaulter's movable
property located inside or outside his flat.
QUESTION 3
A major property development company is considering
building a hotel attached to its theme park. The estimation
of total costs and the total benefits of building a 10- 15-,
20-, or 25-story hotel is shown in the table.
(a) Compute the marginal cost and the marginal benefit of the
10- 15-, 20-, or 25-story buildings.
Project Total Cost Marginal Cost Total Benefit Marginal Benefit
(RM Millions) (RM Millions) (RM Millions) (RM Millions)
No hotel 0 - 0 -
A: 10-story hotel 140 140 160 160
B: 15-story hotel
320
180
460
300
C: 20-story hotel 480 160 560 100
D: 25-story hotel 680 200 620 60
(b) Should the developer build a hotel? If so, what size building and
what will be the total benefit, total cost, and net benefit to society?
Project
Net Benefit
ANSWER:
(RM Millions) Yes, the developer should build a hotel and the hotel that
will provide the optimal allocation of resources is the 15-
No hotel 0 story hotel.
A: 10-story hotel 20
B: 15-story hotel
140
The total benefit of the 15-story hotel is RM460 Millions
C: 20-story hotel 80
and the total cost is RM320 Millions.
D: 25-story hotel -60
Therefore, the net benefit of the 15-story hotel is the
Net Benefit = Total cost - Total benefit highest among the other projects, which is RM140
Millions.
QUESTION 4
Discuss the differences between traditional one-person-one-
vote (1p1v) majority voting versus those of quadratic
voting. Which System do you prefer, and what are the
reasons behind it?
1.Traditional 1p1v
principle of representation that stipulates that a citizen's vote should not be valued higher
or lower than that of another citizen.
Total
Issue/voters Dom Adam Johny
1 person, 1 vote is allowed. votes
Hospital 1 - 1 2
Inefficient voting outcomes
rejection of a public good
School - 1 - 1
acceptance of a public good
2. Quadratic voting system
a method of collaborative decision-making in which participants vote for their preferred
choice and strength of preference.
Issue/voter
Total
1 person can cast more than 1 vote and Dom Adam Johny
s votes
they have to purchase their vote.
Cost of voters = (number of votes)^2 Hospital 2 3 1 6
School 1 1 5 7
Total cost
9 16 36 61/13
(RM)
QUESTION 5
Malaysia Competition Commission fined MAS and AirAsia RM10 million each in 2014
after finding that both airlines had breached the market sharing prohibition under Section
4 (2) of the Competition Act by agreeing on sharing markets in the air transport services
sector within Malaysia. Both airlines then appealed over the fine, and on Feb 18, 2016,
Competition Appeal Tribunal (CAT) set asideMyCC's decision.
[Source: News Straits Times (https://bit.ly/2ZItg7w)]
Related to the concept of Government Failure in economics, discuss the news excerpt
above.
Happens
when there is insufficient allocation of
resources due to the government
intervention
Government
Failure Causes
Regulatory Capture Lack of information
The intervention of regulators in the
decisions involving laws , rules &
regulations
Regulatory
CAT as the regulator should have
stopped MAS & Airasia's deal after the
Capture
Competition Act came into force
CAT acted in the interest of the
producers while the consumers are left
with no choice
CAT also declared there were loopholes
in MyCC's accusations and proceeded
to defend AirAsia and MAS
MyCC might've not thoroughly
investigated.
AirAsia and MAS made an agreement
prior to the Competition Act coming
into force
Lack of
information Consequence
Loss of economic welfare
Have to pay RM30,000 as a
reparation cost
REFERENCES
1. Ingham, S. (2022). public good | economics | Britannica. In Encyclopædia Britannica.
https://www.britannica.com/topic/public-good-economics
2. Brue, S. L., Masaki, S., & McConnell, C. R. (2017). Economics. McGraw-Hill Education.
3. The Audiopedia. (2018, September 10). What is QUADRATIC VOTING? What does QUADRATIC VOTING
mean? QUADRATIC VOTING meaning. YouTube. https://www.youtube.com/watch?v=spox0h4O7qU
4. Team, T. I. (2021, December 7). What is the free-rider problem? Investopedia.
https://www.investopedia.com/terms/f/free_rider_problem
5. Ho,L.y (2021a,January 12). AirAsia, MAS did not breach anti-competition rules, the court told. ree Malaysia
Today.
http://www.freemalaysiatoday.com/category/nation/2021/01/12/airasia-mas-did-not-breach-anti-competition-rules-
court-told/
Thank You!
Do you have any questions for me before we go?
