Which two characteristics are used to differentiate private goods from public goods?

• A. Production cost and market structure
• B. Supply and demand
• C. Price elasticity and marginal cost
• D. Excludability and rivalry in consumption

Answer: (D)

Verified step by step guidance

1. Understand the definitions of private goods and public goods in microeconomics. Private goods are those that are both excludable and rivalrous, while public goods are non-excludable and non-rivalrous.
2. Define excludability: a good is excludable if it is possible to prevent someone from using it if they do not pay for it.
3. Define rivalry in consumption: a good is rivalrous if one person's consumption of the good reduces the amount available for others.
4. Recognize that these two characteristics—excludability and rivalry—are the key criteria used to classify goods as private or public.
5. Compare the other options (production cost, market structure, supply and demand, price elasticity, marginal cost) and understand that while important in economics, they do not serve as the primary basis for distinguishing private goods from public goods.