Chapter 11

Question 1

Private Good

Answer 1

Rival and Excludable

Anything you can buy at a market

Question 2

Public Good

Answer 2

Not Rival, Not excludable
the market under provides
create huge positive externalities—> this makes the gov. step in
———————————————-
the gov. can not provide the right amount of public goods, will under or over provide
(Bert, Ernie, Cookie Monster example)

Question 3

Common Resource (and possible solutions

Answer 3

Not Excludable, is rival
ex) fish in the North Atlantic
these goods are often exhausted and overused
———————
possible solutions
1) all agree to use resource less (leads to cheating doesn’t work)
2) establish ownership (gov owns sea)
3) treat it as a negative externality (would need support from all gov.)

Question 4

Club Good

Answer 4

Excludable, not rival

ex) country clubs, toll roads
- if a none rival good isn’t crowded it is a club good

Question 5

Free Rider Problem

Answer 5

• People will pay less when they know other people will pay more so that they get a larger consumer surplus
• As the group gets smaller, free rider problem diminishes