1. In the old days lighthouses were built along the coast to prevent ships from
ID: 1181197 • Letter: 1
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1. In the old days lighthouses were built along the coast to prevent ships from running aground on rocks in unfamiliar ports. By shining a beam of light over a port and guiding ships away from rocks, these vital buildings reduced the risk for ship captains and were generally considered to be extremely valuable resources. Curiously, lighthouses were almost always run and maintained by local governments. Explain in economic terms why private firms would not run a lighthouse.
In the old days lighthouses were built along the coast to prevent ships from running aground on rocks in unfamiliar ports. By shining a beam of light over a port and guiding ships away from rocks, these vital buildings reduced the risk for ship captains and were generally considered to be extremely valuable resources. Curiously, lighthouses were almost always run and maintained by local governments. Explain in economic terms why private firms would not run a lighthouse.Explanation / Answer
The lighthouse has become famous in economics as a landmark case of a good that had been presumed to require provision by government due to its public nature, whereas in historical fact, as Ronald Coase (1974) there existed lighthouses that were financed by user fees paid by the shippers. My paper updates the study by Coase to examine how advancing technology
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