Ch 1 Flashcards
Non-appropriability characteristics of public goods
Competitive Markets
Market Functions
Government Functions
Market Failure
Market functions
competitive and efficient markets
markets make most efficient use of resources
assumes rationality and impersonal transactions
A drop in supply or rise in demand will cause
a rise in price
Markets need __________ to function efficiently
government
Government provides the market with
infrastructure to bring goods to market
legal system to guarantee property rights and enforce contract
Federal reserve & SEC
Markets fail due to
nature of some services
externalities–positive and negative
imperfect competition/monopolies
Market failure justifies
intervention of government in free markets
Some goods can’t be supplied in the free market because of
non-appropriability
Non-exaustiability
Many can use at the same with without additional cost
Non-exclusion
cannot be limited to those who paid–free rider
What goods are exclusive and exhaustable?
Private goods: Cars, iphones, items from amazon.
What goods are exclusive, but inexhaustible?
Toll goods: Movies, cable TV, Netflix, toll bridges
What goods are exclusive and exhaustible
Common-Pool: Fishing grounds, oil & gas reserves
What goods are not exhaustible and non exclusive?
Public: National defense, pollution control, public parks, radio & tV
Arguments for privatization
Smaller government
More responsive to service needs
More flexibility
More options
Lower cost
Snow removal by govt employees and equipment
Government provision & production
Government outsourcing
Government provision & private production
Off duty offers paid by racetrack
Private provision & government production
Private security at a factory
Private provision & production
Public decision making assumes
People know what’s best for them
Community welfare=welfare of all individuals
At least one person is better off and no one is worse off
Pareto criterion
A public policy is effective if at least one person is better off and no one is worse off.
Relative worth of those harmed vs helped
Budgeting is not fully rational because of
Politics
Personal preferences & needs
Political parties
Representation
