Public goods are characterized by:
Options
AExcludability and Rivalry
BNon-excludability and Non-rivalry
CExcludability and Non-rivalry
DNon-excludability and Rivalry
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Public FinancePYQ - Nov 2018 (Inter)Question 122 of 20
All Questions Correct Answer
✅ Option b — Non-excludability and Non-rivalry
All Options:
- AExcludability and Rivalry
- BNon-excludability and Non-rivalry
- CExcludability and Non-rivalry
- DNon-excludability and Rivalry
Detailed Solution & Explanation
To understand the characteristics of public goods, we need to consider two key concepts: excludability and rivalry.
• Excludability refers to the ability to exclude someone from using a good or service if they do not pay for it.
• Rivalry, on the other hand, refers to the idea that one person's consumption of a good reduces the amount available for others.
Public goods are defined as goods that can be used by everyone, and their consumption does not reduce the amount available for others.
• This means that public goods are non-rival, as one person's consumption does not affect the amount available for others.
• Additionally, public goods are non-excludable, as it is difficult or impossible to exclude someone from using them, even if they do not pay.
Option b is correct because it accurately reflects the characteristics of public goods as non-excludable and non-rival.
• In contrast, options a and d are incorrect because they suggest that public goods are either excludable or rival, which goes against the definition of public goods.
About This Chapter: Public Finance
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Fiscal Policy, Budget, Market Failure
This chapter deals with government finances — how the government earns (taxation) and spends (expenditure) money. Key topics include Fiscal Policy, types of taxes (Direct and Indirect), the Union Budget, Public Debt, and the concept of Market Failure and how government intervention corrects it.
View Official ICAI SyllabusExam Strategy Tip
Focus on the difference between Revenue and Capital items in the budget. Understand Fiscal Deficit and its implications. Tax-related MCQs are commonly asked.
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