Which of the following best describes how collective (public) goods differ from private goods?

• A. Collective goods have a downward-sloping demand curve, while private goods have a perfectly elastic demand curve.
• B. Collective goods are produced by private firms, while private goods are provided only by the government.
• C. Collective goods are non-excludable and non-rivalrous, while private goods are excludable and rivalrous.
• D. Collective goods are always free, while private goods always have a price.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the key characteristics of private goods. Private goods are both excludable and rivalrous, meaning that individuals can be prevented from using them (excludable), and one person's consumption reduces the amount available for others (rivalrous).
2. Step 2: Understand the key characteristics of collective (public) goods. Public goods are typically non-excludable and non-rivalrous, meaning that it is difficult or impossible to exclude individuals from using them, and one person's use does not reduce availability for others.
3. Step 3: Analyze the options given in the problem by comparing these characteristics. For example, check if the statement about demand curves aligns with the definitions of public and private goods.
4. Step 4: Recognize that the defining difference lies in excludability and rivalry, not necessarily in who produces the goods or whether they have a price.
5. Step 5: Conclude that the best description is that collective goods are non-excludable and non-rivalrous, while private goods are excludable and rivalrous.