10. Private VS Public Goods

Question 1

Name

Answer 1

Definition

Question 2

Non-rivalry

Answer 2

One individual’s consumption of the good does not impede another individual from consuming it as well: the MC of providing the public good to an additional individual is zero.

Question 3

Non-excludability

Answer 3

No one can be exluded from consuming the good.

Question 4

Pure Public Goods

Answer 4

Goods that are perfectly non-rivalrous & non-excludable.

Question 5

Impure Public Goods

Answer 5

Goods that are only non-rivalrous & non-excludable only up to a point.

Question 6

Samuelson Condition

Answer 6

The Samuelson Condition states that the efficient quantity of a public good is found by setting the sum of the individual marginal benefits equal to the marginal cost. (MSB=MC)

Question 7

Free-Riding

Answer 7

Free-Riding denotes the action of enjoying a good without paying for it— is caused by a non-excludable nature of public goods and it results in their under-provision

Question 8

Lindahl Prices

Answer 8

Lindahl Prices imply that each individual pays for the provision of a public good according to their marginal benefit. (substitute in the socially optimal quantity)