We consume many _____ without paying: parks, national defense, clean air & water.
When goods have no ______, the market forces that normally allocate resources are absent.
The private market may fail to provide the __________ ________ quantity of such goods with no price
________ can sometimes improve market outcomes.
A good is ________ if a person can be prevented from using it
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
not rival example
An MP3 file of Kanye West's latest single
excludable, rival in consumption
private goods example
not excludable, not rival
public goods example
rival but not excludable
common resources example
fish in the ocean
excludable but not rival
natural monopolies example
For public goods and common resources, ________ arise because something of value has no price attached to it.
private decisions about consumption and production can lead to an _______ _____
____ ____ can potentially raise economic well-being
Public goods are difficult for private markets to provide because of the ___-____ ______
a person who receives the benefit of a good but avoids paying for it
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.
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
a study that compares the costs and benefits of providing a public good
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
Public goods tend to be ____-_______, while common resources tend to be ___-_____
These problems arise because ________ _____are not well-established