Reputation uncertainty copyrights trademarks

1. _______ is any good or service whose consumption by one person is not affected by the consumption of the same good or service by someone else.

2. _______ occurs when a person consumes a valuable good or service without having to pay.

3. _______ is a very important way for individuals to gain the information necessary for individual economic choice.

4. _______ is important because it lowers search costs by allowing information gathered in the past to be used in the future.

5. For technological innovations we have _______ and for other kinds of ideas in printed or recorded form we have _______.

6. _______ is not merely a matter of costly search however.

7. We even protect the information about quality of goods associated with brand names by allowing for legally registered _______.

IV. Read and translate the text:

Goods ere called public goods, not because they are provided by the government, but because they differ from the usual goods and services that we privately enjoy. Public goods pose a serious problem for a market economy; markets are organized on the basis of individual decision-making, but in a sense, public goods require collective decisions.

A public good is any good or service whose consumption by one person is not affected by the consumption of the same good or service by someone else.

Public goods have three characteristics that create problems for markets. First, consumption of a public good by one individual is not competitive with consumption by another individual. Second, consumption is nonexclusive. Third, the production of public goods is accompanied by positive externalities.

Consumption of a public good by a single individual does not affect the ability of others to consume the same public good. Hence a public good can be jointly consumed by two, three, or many thousands of people, consumption of a public good is noncompetitive and there is no rationing problem.

It is generally not possible to keep those who do not pay for a public good from consuming it. Consumption of a public good is nonexclusive.

Finally, if it is not possible to exclude others from consuming a public good, the purchase or provision of a public good by one person creates a positive externality since others benefit from the purchase or provision without having to pay.

These three aspects of public goods create a special problem that makes it difficult for markets to produce them.

The problem is free riding. Free riding occurs when a person consumes a valuable good or service without having to pay. Because the consumption of public goods is nonexhaustive and noncompetitive, each of us has an incentive to free ride, that is, consume goods and services that others have purchased.

Information is enormously important in making decisions in a market economy.

Since this information is valuable, we might expect that there would be a market for it, a place where we could purchase information about automobiles, stereos, canned and frozen goods, and other commodities of, where a firm could purchase information about the quality of potential employees. However, these markets are very difficult to create because of the public-good nature of the information.

Searching for information is a very important way for individuals to gain the information necessary for individual economic choice; searching produces information, that cannot in general be purchased in some market.

Reputation is important because it lowers search costs by allowing information gathered in the past to be used in the future. Frequently, reputation becomes associated with a label or brand name.

Use of an economically valuable idea by one person does not lessen the value when the idea is used by another person.

One response to these problems is to create property rights in ideas, particularly when the ideas are embodied in piece of equipment or are written down. For technological innovations we have patents and for other kinds of ideas in printed or recorded form we have copyrights. We even protect the information about quality of goods associated with brand names by allowing for legally registered trademarks.

V. Answer the following questions:

1. What is the difference between public goods and private goods?

2. What three characteristics do public goods have?

3. How do we call a phenomenon, when a person consumes a valuable good or service without having to pay?

4. Why is information a public good?

5. Why is reputation important?

6. How does the state attempt to stimulate technological or recorded innovations?

VI. Define the terms:

registered trademark

free riding

positive externalities

reputation

public goods

patent

information

copyright

VII. Translate into English:

1.Суспільні товари відрізняються від товарів особистого вжитку. 2. Ринки організовуються шляхом прийняття індивідуальних рішень, тоді як вироблення суспільних товарів потребує колективних рішень. 3. Споживання суспільного товару однією особою не створює конкуренції для споживання його іншими особами. 4. Виробництво суспільного товару супроводжується позитивними зовнішніми виявами. 5. Споживання суспільного товару необмежене. 6. Ми спостерігаємо безоплатне користування суспільними товарами та послугами, оскільки споживання суспільних товарів є необмеженим і неконкурентним. 7. Інформація дуже важлива для прийняття рішень в умовах ринкової економіки. 8. Репутація дуже важлива, оскільки вона заощаджує витрати на пошуки, даючи можливість використовувати в майбутньому інформацію, зібрану в минулому.

VIII. Read and dramatize the following dialogue:

M.: Why if it isn't Bob! Never expected to meet you at this shop. This is a small world!

B.: Hi, Mike! I've got to do some shopping.

M.: So you are to buy some goods for yourself. And do you know that there are things in this world that you can't consume alone.

B.: Really. I've never heard about this.

M.: Yes, you have, but never realized it. I'll try to explain this to you in some words.

B.: That's rather interesting.

M.: So, some goods can be consumed by one person and still be available for consumption by others. For example, you can enjoy the light, color, noise and excitement associated with fireworks without affecting the ability of your neighbor to also enjoy the fireworks. Or, you can capture the signal from a television station and use it without affecting anyone else's ability to capture and use the same signal.

B.: And can we take as an example of such a case a ship at sea. It can use the services of a lighthouse that warns of a danger without affecting the use of the lighthouse service by other ships in the area.

M.: And police services make a city safer for all of its citizens – I «consume» safety, but this does not affect your ability to «consume» safety. National defense provides security for one citizen at the same time as it provides the same service for another citizen.

B.: I see. Each of these goods or services is different from an apple, a loaf of bread, a seat at a rock concert, or the medical services provided by a doctor.

M.: Yes, you are quite right. If you consume an apple, no one else can consume the same apple. It's gone. Similarly with a loaf of bread – your consumption precludes someone else's consumption. When you occupy a seat at a rock concert, no one else can occupy the same seat. If you spend one hour with your doctor, the doctor cannot provide the same hour's service to another patient.

B.: Oh! I've never thought about this. And what do economists call such goods.

M.: They call them public goods, as they differ from the usual goods and services that we privately enjoy.

B.: Thank you for the information. That was really new to me.

M.: If you want to know more about public goods you may read a book on economics.

B.: hank you. Bye.

M.: Bye.

IX. Make up your own dialogue using the following expressions:

consumption of public goods to obtain benefits

and services registered trademark

use of an economically valuable idea technological innovations

to create property rights in ideas to gain the information

to protect the information brand name

to have a good reputation individual economic choice

searching for information

X. Answer the following questions as in the models:

M о d e I s: a) Suppose you want to lower search costs. What would you do? I should allow information ga­thered in the past to be used in the future, b) Suppose you wanted to lower search costs. What would you have done? I should have allo­wed information gathered in the past be used in the future.

1. Suppose you want to stimulate innovation. Suppose you wanted to stimulate innovation. 2. Suppose you want to create property rights in ideas. Suppose you wanted to create pro­perty rights in ideas. 3. Suppose you want to gain the information necessary for individual economic choice. Suppose you wanted to gain the information necessary for individual eco­nomic choice. 4. Suppose you want to get reputation. Suppose you wanted to get reputation. 5. Suppose you want to have copyrights. Suppose you wanted to have copyrights.