Chapter 6.3 Flashcards
1
Q
Two characteristics of a public good
A
Non-rivalrous and non-excludable
2
Q
Non-rivalrous definition
A
Consumption by one person does not reduce consumption by someone else
3
Q
Non-excludable definition
A
It isn’t possible to exclude someone from using the good
4
Q
Free rider problem
A
The problem where firms don’t produce a good due to it being non-excludable
5
Q
Why are public goods a type of market failure?
A
Because of the free rider problem, firms won’t produce the goods so nothing will be allocated to their production
6
Q
Contracting out
A
When a government makes an agreement with a private firm to carry out an activity that the government was previously doing itself
