Chapter 11: Public Goods and Common Resources
good is not produced
result of the free rider problem?
free rider problem
public goods are difficult for private markets to provide because of the ____ ____ ____
common resources; rival in consumption
unlike public goods, _____ ______ are _______; GOV role= ensuring that the goods aren't overused
price; inefficient outcome
(public goods/common resources) externalities arise because something with value has no _____ attached to it, so private decisions lead to ____ ____
underprovided
Public goods-->
excludable
a good is ____ if a person can be prevented from using it
rival in consumption
a good is _____ ___ _____ if one person's use of it reduces others' use
tragedy of the commons
a parable that illustrates why common resources get used more than socially desirable; the private incentives outweigh the social incentives
overconsumed
common resources-->
club goods (cable)
good that is excludable and not rival in consumption
private goods (cones, clothing)
good that is excludable and rival in consumption
public goods (national defense, tornado sirens)
good that is not excludable and is not rival in consumption
common resources (environment, fish in ocean)
good that is not excludable but is rival in consumption
not excludable
if a good is (excludable or not excludable) people have incentive to be free riders
exceeds; tax
if the benefit of the good _____ the cost of providing it, the government should provide the good and ____ those who benefit
common resources; excludable
like public goods, ____ ____ are not _______; can't prevent free riders, little incentive for firms to provide, GOV role= seeing that they're provided
cost benefit analysis
measuring the benefit of a public good is difficult so we use the ________ (study that compares the costs and benefits of providing a public good)
free rider
person who receives the benefit of a good but avoids paying for it
regulate use; impose corrective tax to internalize the externality; permits to use resource
policy options to prevent overconsumption (3)
property rights
problems arise because ___ ____ aren't well established
excludable; rival in consumption
two important characteristics of goods
socially efficient Q
when goods have no prices, the market forces that normally allocate resources are absent, so the private market may fail to provide the ____ ____ ____ of such goods