Public Goods and Common Resources

Created by sommercagle 

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goods

We consume many _____ without paying:
parks, national defense, clean air & water.

prices

When goods have no ______, the market forces that normally allocate resources are absent.

socially efficient

The private market may fail to provide the __________ ________ quantity of such goods with no price

governments

________ can sometimes
improve market outcomes.

excludable

A good is ________ if a person can be prevented from using it

excludable examples

fish tacos, wireless internet access

not excludable examples

FM radio signals, national defense

rival in consumption

A good is _____ __ ________ if one person's use of it diminishes others' use

rival example

fish tacos

not rival example

An MP3 file of Kanye West's latest single

private goods

excludable, rival in consumption

private goods example

food

public goods

not excludable, not rival

public goods example

national defense

common resources

rival but not excludable

common resources example

fish in the ocean

natural monopolies

excludable but not rival

natural monopolies example

cable TV

externalities

For public goods and common resources, ________ arise because something of value has no price attached to it.

inefficient outcome

private decisions about consumption and production can lead to an _______ _____

public policy

____ ____ can potentially raise economic well-being

free-rider problems

Public goods are difficult for private markets to provide because of the ___-____ ______

free rider

a person who receives the benefit of a good but avoids paying for it

not produced

If good is not excludable, people have incentive to be free riders, because firms cannot prevent non-payers from consuming the good.
Result: The good is ___ ______, even if buyers collectively value the good higher than the cost of providing it.

exceeds

If the benefit of a public good ______ the cost of providing it, government should provide the good and pay for it with a tax on people who benefit

cost-benefit analysis

a study that compares
the costs and benefits of providing a public good

efficient provision

Cost-benefit analyses are imprecise, so the ______ ______ of public goods is more difficult than that of private goods

important public goods

§National defense
§Knowledge created through basic research
§Fighting poverty

tragedy of the commons

§The tragedy is due to an externality
§People neglect this external cost

important common resources

§Clean air and water
§Congested roads
§Fish, whales, and other wildlife

under-provided, over-consumed

Public goods tend to be ____-_______, while common resources tend to be ___-_____

property rights

These problems arise because ________ _____are not well-established

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