All Flashcards
Define Public Goods.
Goods provided by the government because the free market fails to produce them efficiently.
Define Market Failure.
When the free market doesn't allocate resources efficiently.
Define the Free-Rider Problem.
People consume more than their fair share of a public good or pay less than their fair share of its cost.
Define Non-Excludability.
You can't prevent anyone from using the good, even if they don't pay.
Define Non-Rivalry.
One person's use of the good doesn't reduce its availability for others.
Define Commons Goods.
Non-excludable but rival.
Define Low-Congestion Goods (Club Goods).
Excludable but non-rival.
Define Marginal Social Benefit (MSB).
The additional benefit to society from one more unit of the public good.
Define Marginal Social Cost (MSC).
The additional cost to society from one more unit of the public good.
Define Tragedy of the Commons.
Overconsumption due to self-interest, leading to depletion of the resource.
What are the differences between public and private goods?
Public goods are non-excludable and non-rival, while private goods are excludable and rival.
What are the differences between commons goods and low-congestion goods?
Commons goods are non-excludable and rival, while low-congestion goods are excludable and non-rival.
What are the differences between the free-rider problem and the tragedy of the commons?
Free-rider problem involves non-payment for a non-excludable good, while the tragedy of the commons involves overuse of a rival resource.
What are the differences between non-excludability and non-rivalry?
Non-excludability means you cannot prevent someone from using the good, while non-rivalry means one person's use doesn't diminish its availability for others.
How do MSB and MSC differ in the context of public goods?
MSB is the additional benefit to society, while MSC is the additional cost to society from one more unit of the public good.
What distinguishes a public good from a mixed good?
Public goods meet both non-excludability and non-rivalry criteria, while mixed goods only satisfy one.
How does the role of government differ in the provision of public versus private goods?
The government typically provides public goods due to market failure, while private goods are provided by the private sector.
What are the key differences between a club good and a private good?
Club goods are excludable and non-rivalrous up to a point, while private goods are excludable and rivalrous.
Compare and contrast the challenges associated with providing public goods versus common goods.
Public goods face the free-rider problem, while common goods face the tragedy of the commons.
What is the difference between the public sector and the private sector?
The public sector is the government-run market for public goods and services, while the private sector is the free market where consumers and firms make economic decisions.
What is the impact of government subsidies on the provision of club goods?
Subsidies can lower the cost and increase the utilization of club goods.
How can regulations help to mitigate the tragedy of the commons?
Regulations can restrict access or set quotas to prevent overexploitation of resources.
What is the effect of taxation on the provision of public goods?
Taxation provides the necessary funding for the government to supply public goods.
How do property rights affect the tragedy of the commons?
Clearly defined property rights can incentivize responsible resource management, preventing overuse.
How can privatization of a common resource affect its use?
Privatization can lead to more efficient use but may also restrict access.
What is the effect of congestion pricing on low-congestion goods?
Congestion pricing can reduce overuse and maintain the non-rival nature of the good.
How can government intervention address market failure in the case of public goods?
The government can provide the good directly or subsidize its production to ensure adequate supply.
What are the potential drawbacks of government provision of public goods?
Potential drawbacks include inefficiency, over-provision, and political influence.
How does international cooperation help in managing global commons?
International agreements can establish rules and regulations for the use of shared resources like oceans and the atmosphere.
What is the role of cost-benefit analysis in determining the optimal quantity of a public good?
Cost-benefit analysis helps to identify the point where MSB equals MSC, guiding the decision on how much to provide.