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* The textbook exposits these ideas using a simple example – a fireworks display in Smalltown, U.S.A. The Study Guide offers another example, in which the cost of installing a streetlight in a neighborhood is less than the collective benefits of the people who live on that street – yet, no one takes the initiative to provide it. If you’re pressed for time, you can safely omit this exercise. Its contents will be covered in a subsequent slide, and students can learn this material from a careful reading of the chapter. This exercise has several objectives: 1) It gets students to anticipate the policy solutions to the common resource problem based on what they have just learned about the problem. 2) After giving students a big hint on the preceding slide, it tests to see whether they make the connection between the common resource problem and the policies to deal with negative externalities they learned in the preceding chapter. To get through this activity quickly, display the question, give students a quiet moment to formulate their responses, then ask for students to share their answers. If you can spare an extra couple of minutes, have them work in pairs – two minutes should suffice – and then ask students to share their answers with the class. All of these policy options have been used in modern times to deal with the common resource problem. The following slide shows a few examples. * The electromagnetic frequency spectrum is a common resource. It is not excludable: anyone with the right equipment can use it. It is rival in consumption: there’s a limited amount of spectrum available. The U.S. FCC has been auctioning licenses to use parts of the spectrum since 1994. These auctions raise substantial revenue for the federal government, and help allocate spectrum efficiently (firms that can use it most productively bid the most in the auctions). * Regarding congested roads: please encourage your students to read the new “In the News” bo
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