Market Failure: Public Goods and Common Resources

Question 1

Excludability

Answer 1

Excludability refers to the property of a good whereby a person can be prevented from using it.

Question 2

Rivalry

Answer 2

Rivalry refers to the property of a good whereby one person’s use diminishes other people’s use.

Question 3

Pure Public Goods

Answer 3

Cannot exclude others from using it (jointness of supply)

Consumption by one person does not deplete consumption by others

Question 4

Quasi Public Goods

Answer 4

Quasi-Public Goods (also called Near Public Goods)
Non-rival up to a point, until congestion occurs
Can exclude others

Question 5

Private Goods

Answer 5

Private goods

are both excludable and rival

Question 6

Common Resources

Answer 6

Common resources

are rival but not excludable

Question 7

The Free - Rider Problem

Answer 7

A person who receives the benefit of a good but avoids paying for it.

Prevents private markets from supplying public goods efficiently.

Question 8

Tradegdy of Commons

Answer 8

Tragedy of the commons refers to common resources which are used more than is desirable from the standpoint of society as a whole.
No one has an incentive to reduce usageas each person’s usage is only a small part of problem. Given this, people tend to neglect the negative externality.It occurs when goods are rival but not excludable and there is absence of property right