Chapter 7

Question 1

Pure Public Goods

Answer 1

Goods that are perfectly non-rival in consumption and are non-excludable.

Question 2

Non-rival in Consumption

Answer 2

One individual’s consumption of a good does not affect another’s opportunity to consume the good.

Question 3

Non-excludable

Answer 3

Individuals cannot deny each other the opportunity to consume a good.

Question 4

Impure Public Goods

Answer 4

Goods that satisfy the two public good conditions (non-rival) in consumption and non-excludable) to some extent, but not fully.

Question 5

Numeraire Good

Answer 5

A good for which the price is set at $1 to model choice between goods, which depends on relative, not absolute, prices.

Question 6

Free Rider Problem

Answer 6

When an investment has a personal cost but a common benefit, individuals will underinvest.

Question 7

Altruistic

Answer 7

When individuals value the benefits and costs to others in making their consumption choices.

Question 8

Social Capital

Answer 8

The value of altruistic and communal behavior in society.

Question 9

Warm Glow Model

Answer 9

A model of the public goods provision in which individuals care about both the total amount of the public good and their particular contributions as well.

Question 10

Crowd-out

Answer 10

As the government provides more of a public good, the private sector will provide less.