Question from Past Microeconomics Qualifying Exam[]
Fall 2000 - Section I, Question three, George Mason University
True, False, Uncertain. Determine whether or not each of the following statements are true or false. Explain your reasoning briefly in a paragraph or two. (The explanation is often more important than the answer given). Include a carefully labeled diagram or game matrix if it helps to clarify your answer.
Police protection is a non-excludable public good, so ineffciently little of it is provided in equilibrium.
Answer[]
True. Public goods externalize benefits and are subject to free-riders, resulting in a less-than-socially-optimal quantity provided.
Alternative Answer
Police protection is not necessarily a non-excludable public good. It is treated like one in the current framework, however, historic as well as contemporary examples show that it can be an excludable, rival, private good (i.e. private security in the middle ages, and private security today). And even in the current framework of public police different people receive different amounts of protection, i.e. rich vs. poor neighborhoods.
Furthermore even if police protection was a public good an optimal quantity of it might still be provided, if rent-seeking motives of individual policemen are taken into account.
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