1.3.3 (Public Goods)

Question 1

What are Public Goods?

Answer 1

• Goods that are non-rivalrous, do not stop someone else from using it
• Goods that are non-excludable, meaning you cannot stop someone from accessing the good

Question 2

What is the Free-Rider Problem?

Answer 2

• Cannot charge an individual a price for the provision of a non-excludable good because someone will gain the benefit from it without paying anything
• A free rider is someone who receives the benefits without paying for it

Question 3

What is the Free-Rider Problem? (2)

Answer 3

• Private sector producers will not provide goods to people because they cannot be sure of making a profit due to non-excludability of public goods
• If the provision of public goos was left to the market mechanism, the market would fail so this is why they are provided by the government and finances through tax