Key terms - Public choices and public goods Flashcards
Common resource
Rival and non-excludable. A unit of a common resource can be used only once, but no one can be prevented from using what is available.
Excludable
It is possible to prevent someone from enjoying the benefits of an excludable good/service.
Externality
An external cost/benefit that arises from the production or consumption of a private good and which falls on someone other than its producer or consumer.
Marginal social benefit
MSB = marginal benefit + marginal external benefit.
Government failure
A situation in which government actions lead to inefficiency - to either underprovision or overprovision.
Principle of minimum differentiation
The tendency for competitors to make themselves similar to appeal to the maximum number of clients/voters.
Public production
A good/service is produced by a public authority that receives its revenue from the government (e.g. education services).
Subsidy
A payment that the government makes to private producers.
Mixed good
A private good; the production/consumption of which creates an externality.
Natural monopoly good
Non-rival and excludable. When buyers can be excluded if they don’t pay but the good is non-rival, marginal cost is zero.
Non-excludable
Everyone benefits from it regardless of whether or not they pay for it.
Non-rival
One person’s use does not decrease the quantity available for someone else.
Political equilibrium
The choices of voters, firms, politicians, and bureaucrats are all compatible, and no group can see a way of improving its position by making a different choice.
Public good
Both non-rival and non-excludable. It simultaneously benefits everyone, and no one can be excluded from enjoying its benefits.
Rival
One person’s use decreases the quantity available for others.
