What is. Critical in determining wheat-er something is produced as a public good?

Answer 1

When determining whether something should be produced as a public good there are a few key criteria that must be taken into consideration:

• Costs of production
• Benefits of production
• Availability of substitutes
• Existence of external costs and benefits
• The incentives of those producing the good
• The incentives of those consuming the good

The costs of production are important to consider because they determine the amount that could be charged to consumers and how much of the good can be produced. The benefits of production must also be taken into account because they show the overall value of the good to society. The existence of substitutes is important as this affects the degree to which the good is considered a public good. External costs and benefits are also important to consider as these can affect the incentives for both producers and consumers. Finally the incentives of producers and consumers must be taken into account to ensure that the good is produced in the most efficient way possible.