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