A public good is non-exclusive and non-rivalrous and thus provides external benefits that others can enjoy without paying. However, this does not mean that it cannot be sold at a price above zero. It is just that whoever produces such a good does so knowing some consumers will benefit without paying.

It is impossible to prevent people from enjoying clean air (assuming the air is clean, of course). Fish stocks are a common resource accessible to all (although there may be some attempts to limit access by government).

You can be excluded from satellite TV if you don't pay for the service.

This is an interesting case of a good that is non-rivalrous up to a point. In the middle of the night one additional car on the highway makes no difference to others already on the road. At the morning rush hour, even one car adds delay to a surprising number of drivers upstream.

You can enjoy a poetry reading or the benefits of law enforcement without diminishing the quality for others. The movie theater is the opposite case of the highway. It can definitely be rivalrous at peak times but on Wednesday mornings the theater is likely mostly empty and one additional person makes no difference.

A performance on a public street is both non-excludable and non-rivalrous. A concert in an arena and the discount warehouse store are excludable - you would have to pay to enjoy the benefits. A fillet of salmon is a private good - you would have to pay and by consuming it you would leave less (or none) for the next person.

A rise in consumer income would shift the demand curve for apples out while a large harvest would shift the supply curve out. This would unambiguously increase the quantity traded. The price would depend on the relative amount of the shifts and the slopes of the supply and demand curves.

A new technology for harvesting/processing apples would shift the supply curve outward, which would necessarily result in a lower market price for apples.

Incorrect answers:

• Talk show host increases demand => higher price
• Price of substitute increases => higher demand => higher price
• Wages increase => lower supply. Lower incomes => lower demand. Net result is lower quantity, ambiguous change in price.

Inferior goods are those which a consumers uses less of when his income increases. They tend to be goods which have a higher-quality substitute that becomes affordable as income increases. For John, the train ride may be a faster or more comfortable alternative to the bus ride.

Carol's income has increased and she subsequently buys more apples and oranges. Therefore, apples and oranges are normal goods for her.

The first sentence is also true for superior goods. However, a superior good is one in which the proportion of a consumer's budget for a certain good increases with an increase in income. Carol received a 25% raise and subsequently bought 25% more apples and 20% more oranges. Thus, they are normal goods but not superior goods.

You can infer simply from the decreasing market price that the firm is a price-setter and thus not a price-taker nor in a perfectly competitive market. Of the choices given, that would imply a monopoly, which we would expect to make both an accounting profit and an economic profit.

You can even calculate the marginal revenue so that the MR curve would be declining as characteristic of a monopolist.