1)Which is an example of a public good?

2)What are the challenges of providing non-excludable goods?

3)State true or false and justify your answer:

The issues of corporate governance are really agency problems.

1)There are various examples of public goods in the market that include national defense, law enforcement, and clean water access. Besides, the government ensures that law enforcement officers protect people without directly paying for their expenses. Moreover, the provision of clean water to all society members, regardless of their social status, acts as a public good.

2)Non-excludable items such as fish stocks cannot be excluded from being consumed by entities who do not pay for them. It is difficult and nearly impossible to restrict their usage. Hence, some people free ride on the cost paid by others. This is a challenge associated with non-excludable goods.

3)The statement is TRUE.

For a private firm, the owner and the manager would be the same, which will not raise any conflicts in decision-making. However, for a public-traded firm, there would be manny owners and not all of them will attend the business management. Because of that, it would raise a concern that the business might be operated to achieve interests of a group of people, but not the best interest for owners. Consequently, the agency problem appears as a barrier to the process of decision-making in the business.