1.3.3: Public Goods

Question 1

What are public goods?

Answer 1

Good that are available to all, once provided. They are non-rivalry and non-excludability.

Question 2

What is non-rivalry?

Answer 2

One person benefiting from the good doesn’t affect others from benefitting from the same good.

Question 3

What is non-excludability?

Answer 3

All consumers receive the same amount of utility from the good.

Question 4

What is an example of a public good?

Answer 4

Street lights: available to everyone (non-excludability) and everyone receives the same amount of utility (non-rivalry).

Question 5

What are quasi-public goods?

Answer 5

A near-public good that has many - but not all - of the characteristics of a public good.

Question 6

What is an example of a quasi-public good?

Answer 6

Roads: tolls (excludability) and congestion (rivalry).

Question 7

What is the free-rider problem?

Answer 7

It is impossible to stop someone from benefitting from a public good, even if they haven’t paid for it.

Question 8

What is a free-rider?

Answer 8

Someone who receives the benefits without paying for it.

Question 9

Why would the private sector not provide public goods?

Answer 9

The producers can’t be sure of making a profit (due to the non-excludability of the goods).

Question 10

If the provision of public goods was left to the market mechanism…

Answer 10

… it would lead to market failure.

Question 11

How are public goods financed?

Answer 11

Taxes.