Business Degree Certification Practice Test

What type of good is described as rival but not excludable, such as a fishery?

1. Is both rival and excludable

2. Is neither rival nor excludable

3. Is not rival but is excludable

4. Is rival but not excludable

The correct answer is: Is both rival and excludable

The situation described refers to a type of good known as "common goods." These goods are characterized as being rival in consumption, meaning that one person's use of the good diminishes the ability of another person to use it. For example, in a fishery, if one fisherman catches a significant number of fish, there are fewer available for others, making the resource rivalrous. However, common goods are not excludable, meaning it is difficult to prevent individuals from accessing or using the resource, even if their consumption affects others. In the case of fisheries, open access often leads to overfishing, as it is challenging to keep people from fishing in these waters. Recognizing these characteristics helps to understand market failures and the importance of sustainable management of resources. The distinction of being rival but not excludable highlights the challenges associated with managing resources that everyone can access, often leading to depletion issues if not properly regulated.