Chapter 13 Flashcards
Positive extranlities
Benefits third party from market transaction
Private benefits
Person benefits from consuming a good or service
Rates of return
Estimated rates of return go to an individual
Public good
Good or service that is a non rival and none excludable
Social benefits
Sum of private benefits and external benefits
Social rate of return
When estimated rates of return go to society
External benefits
A beneficial spill over to a third party who did not pay for the good or service
Free rider
A person who uses a public good or service who does not pay for it
Intellectual property
Law that protects inventors to produce and sell inventions
Nonexcludable
Good or service is impossible to exclude a person from using the good or service and is hard to charge for the good
Non rivalrous
One person uses a good and other people can too
Rival
One person uses it and others can not use it
Market failure
Production of too few products or services with positive externalities