Viewing greenhouse gas emission reductions as public goods implies they are non-rivalrous and non-excludable, which can lead to underinvestment due to the free-rider problem where individuals cannot be excluded from enjoying the benefits without contributing to the cost. This market failure necessitates government or international intervention to provide incentives or regulations that align private incentives with societal benefits .

In a competitive market, resources are allocated where supply (MC) meets demand, maximizing total surplus. However, a monopoly's marginal revenue curve has twice the slope of the demand curve, causing it to set a lower output and higher price to maximize profit. This results in decreased consumer surplus and total welfare since the output level is reduced from the socially optimal level, creating a deadweight loss .

In a competitive market equilibrium, resources are allocated where supply equals demand, maximizing total surplus including consumer and producer surpluses, reflecting optimal social welfare. Conversely, monopoly equilibrium involves restricted output and higher prices to maximize profit, resulting in decreased consumer surplus, increased producer surplus and a net loss in social welfare due to the resulting deadweight loss, evidencing inefficiency in resource allocation .

A pod of whales is a common-pool resource to hunters because it's rivalrous and non-excludable, leading to potential overuse. To whale watchers, it's a public good as it's non-rivalrous and non-excludable in that context. The benefits from greenhouse gas reductions are public goods since they're non-rivalrous and non-excludable globally. Water from a town well is a common-pool resource as it's rivalrous and excludable by residency rules, while bottled water is a private good due to its excludability and rivalrousness .

In a competitive market, equilibrium occurs where demand equals supply. The demand function is P = 80 - q and marginal cost MC = q. Setting them equal to find equilibrium gives q = 40, P = 40. Consumer surplus is calculated as (1/2)(40)($40) = $800 and producer surplus is (1/2)(40)($40) = $800. Their sum, which is maximized at equilibrium, is $1,600 .

Although exclusionary measures like residency rules make the town well's water excludable, it remains rivalrous as one person's use diminishes availability for others. This makes it a common-pool resource susceptible to overuse and depletion. Effective management requires regulations to balance access and sustainability to avoid the tragedy of the commons .

An efficient allocation occurs where the marginal benefit equals the marginal cost. The inverse demand function is P = 10 - 1.0q. The marginal benefit to the community of preserving one additional mile is 100(P) because there are 100 people. Setting this equal to the marginal cost of $500 gives 100(10 - 1.0q) = 500, thus q = 5 miles. The economic surplus is calculated as the area under the demand curve above the supply curve (marginal cost), which is a triangle with base 5 miles and height ($1,000 - $500), giving a surplus of (1/2)(5)($500) = $1,250 .

When a monopoly controls the market, it maximizes profit where marginal revenue (MR) equals marginal cost (MC). For a linear demand P = 80 - q, the MR curve is P = 80 - 2q. Solving 80 - 2q = q for equilibrium gives q = 26.67, P = 53.33. Consumer surplus is reduced to (1/2)(26.67)($80 - $53.33) ≈ $354, while producer surplus increases to (26.67)($53.33) - (0.5)(26.67)^2 = $709.5. The total surplus is lower at $1,063.5 compared to $1,600 in a competitive market .

Public goods are non-rivalrous and non-excludable, meaning their use by one does not decrease availability to others and cannot exclude non-payers. For whale watchers, a pod of whales as a public good offers enjoyment without reducing availability or excluding others. Conversely, a pod of whales is a common-pool resource to hunters due to rivalry and difficulty in exclusion, leading to potential over-exploitation .

Bottled water is a private good because it's excludable and rivalrous; people can be prevented from using it without purchase, and consumption by one person reduces the amount available for others. These characteristics lead to efficient market allocation through price mechanisms, assuming no externalities are present .