1.3.3 Public Goods Flashcards

1
Q

What is a public good

A

A good which is both non-excludable + non-rival

They can also be non-rejectable

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2
Q

Give examples of public goods

A

Sanitation infrastrucutre

Flood denfence projects

Crime control for a community

Reduced risk for disease from vaccination

Freely available knowlege

Public service

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3
Q

Why do Public goods cause market failure

What type of market failure does it cause

A

Due to the problem of a missing market

There is no supply for these goods because no-one will want supply something that they cannot charge for

It will cause complete market failure

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4
Q

What does Excludable mean

A

buyers can be excluded from enjoying the product if they are not willing to pay for it

Gives the seller a change to make a profit and give owner the ability to exercise property rights

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5
Q

What does rival in consumption mean

A

When a good/service is used by a consumer, it is no longer available

One person cosumption of a product reduces the amount left for other to consume and benefit from

Because scarce resoucres are used up in supplying the product

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6
Q

What is the free rider problem

A

Non-payers can enjoy the benefit of consumption at no financial cost

Free rider have no incentive to reveal how much they are willing and able to pay for a public good

They lead to under-pervision of a good, thus market failure

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7
Q

What does non-excludable mean

A

The benefits derived from pure public goods cannot be solely confined to those who have paid for it

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8
Q

What does non-rival in consumption mean

A

Consumption by one consumer does not restrict consumption by other consumer

(the marginal cost of supplying a public good to an extra person is zero so MPB=MSB)

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9
Q

How is the problem of public goods and the free rider problem overcome

A

The must decide what output of public goods is appropriate for society

To do this, they must estimate the net social benefits from making public goods available.

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10
Q

What is a Quasi-Public Good

A

Quasi-public good has some characteristics of a public good being:

Semi-non-rival: to a point one person will not effect the use of a good over another person

Semi-non-excludable: it is possible but difficult/costly to exclude non-paying consumers

Quasi-public good are either non-rivial or non-excludable

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11
Q

Case for Government intervention with public goods

A
  • The non-rival nature of consumption provide a strong case to replace the marekt to provide public goods
  • Many Public good are free at the point of delivery and funded by taxations or licence fees
  • Stops under provision and under-consumption so social welfair is improved
  • They could provide public good more efficently due to economie of scale
  • Providing public good helps affordability and access to important services for lower income households, therefore help inequalities
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12
Q

Argument against state provision of public goods

A
  • If the Gov becomes a monopoly provider, there is a danger of lack of efficiency arising from lack of competition
  • Many other demands of Government finances, and cause an opportunity cost of public goods being provided
    • To overcome this, the state funds private sector to provide public goods
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13
Q

What has effected the distinction between public and private goods

A
  • Advances in technology are causing a blurring of the distinction between public and private goods
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14
Q

What is a common pool resource

A

When no-one owns a resource, it may get overused

i.e. fishing reserves

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15
Q

What is a club good

A

are exludable but non-rival

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