Econ-Chapter 11
If one person's use of a good diminishes another person's enjoyment of it, the good is
rival in consumption.
A lighthouse is typically considered to be a public good because
all passing ships are able to enjoy the benefits of the lighthouse without paying.
A tax on gasoline often reduces road congestion because gasoline
and driving are complements.
Resources tend to be allocated inefficiently when goods
are available free of charge.
Market failure associated with the free-rider problem is a result of
benefits that accrue to those who don't pay.
A good that is rival in consumption and not excludable is called a
common resource
Elephants are endangered, but cows are not because
elephants are a common resource, while cows are private goods.
If people can be prevented from using a certain good, then that good is called
excludable
common resources are
excludable and rival in consumption
Neither public goods nor common resources are
excludable, but only public goods are not rival in consumption.
Both private goods and club goods are
excludable.
National defense is a classic example of a public good because
it is difficult to exclude people from receiving the benefits from national defense once it is provided.
One way to eliminate the Tragedy of the Commons is to
limit access to the common
When property rights are not well established,
markets fail to allocate resources efficiently.
Even economists who advocate small government agree that
national defense is a public good and that the government should provide it.
Both public goods and common resources are
nonexcludable.
Elephant populations in some African countries have started to rise because
ome elephants have been made a private good, and people are allowed to kill elephants on their own property.
A good is excludable if
people can be prevented from using it.
In the Tragedy of the Commons parable, if the medieval townspeople had foreseen the tragedy, then they could have dealt with the problem in much the same way that modern society deals with
pollution
For most goods in an economy, the primary signal that guides the decisions of buyers and sellers is
price
A cheeseburger is a
private good, because it is excludable and rival in consumption.
Most goods in the economy are
private goods
The value and cost of goods are easiest to determine when the goods are
private goods
A streetlight is a
public good
A free rider is a person who
receives the benefit of a good but avoids paying for it.
private good
rival in consumption, excludable
The Tragedy of the Commons occurs because
social and private incentives differ.
When a free-rider problem exists,
the market will devote too few resources to the production of the good.
Government policy can potentially raise economic well-being
when a good does not have a price attached to it.
A cost-benefit analysis of a highway is difficult to conduct because analysts
will have difficulty estimating the value of the highway.
