Optimal Provision of Public and Private Goods

This document discusses the optimal provision of public and private goods. It defines public goods as non-excludable and non-rival, meaning one person's consumption does not reduce availability or prevent another's consumption. Private goods are excludable and rival. The document outlines how to determine the optimal quantity of each good where social marginal benefit equals marginal cost. For public goods, the optimal quantity is where the sum of individual marginal rates of substitution equals the marginal rate of transformation. However, free riders who benefit without paying can cause underprovision of public goods. The document provides an example of beekeeping providing a pollination public good to apple orchards.Read less