Topic 11- Public Choices and Public Goods

Question 1

Public Choice

Answer 1

A choice that has consequences for a LOT of people (maybe even society)

taxes, trade, spending

Question 2

Role of governments

Answer 2

Property rights
allocation of scarce resources (non market)
wealth re-distribution

Question 3

Government Failure

Answer 3

Government failure is a situation in which government actions lead
to inefficiency.

overprovision or under provision.

Question 4

Four decision makers in political marketplace

Answer 4

Voters
Politicians
Firms
Bureaucrats

Question 5

relaitonships in political marketplace

Answer 5

Voters vote

voters/firms support financially

govts supply policies, to draw votes

bureaucrats make it happen

Question 6

Bureaucrats

Answer 6

Bureaucrats try to get the biggest
possible budget for their
departments and provide public
goods and services

Question 7

Public Good

Answer 7

non excludable and non rival

Question 8

Two determinnants of public good

Answer 8

Excludable/Non-Excludable

Rival/Non-Rival

Question 9

Excludable good

Answer 9

Only people who pay enjoy its benefits

private police

Question 10

Non-excludable good

Answer 10

People who dont pay also enjoy benefits

police services

Question 11

Rival Good

Answer 11

one persons use of it decreases amount available to other

eating a fish

Question 12

Non-Rival good

Answer 12

one persons use does not decrease anothers abilitiy to use it

watching tv

Question 13

Excludable and rival in consumption?

Answer 13

Private good!

Food/cloth

pay to enjoy+ using it decreases it for others

Question 14

Excludable and non rival

Answer 14

Club good

like race car events

pay to enjoy+ using it does not decrease abailability for others

Question 15

Non excludable and non rival

Answer 15

Public good

libraries

dont pay to use and using it doesnt reduce it for others

Question 16

Non excludable and rival

Answer 16

Common Resource

fishing

FREE To use but using it reduces others chances

Question 17

What are amrkets good at providing efficient levels of?

Answer 17

Private goods! because one buyer one consumer

Question 18

Why are markets not good at providing efficient levels of other good types?

Answer 18

-people can free ride public goods, dont need to pay
-People overconsume common reosurces
-pROFIT MAXIization too hard bc too little people enjoyin g a club good

Question 19

Club good also called

Answer 19

Quasi public good

Question 20

Free rider problem

Answer 20

for public goods people dont feel incentive to pay so too much benefit not enough cost

firework show

Question 21

How do governments solve free rider problem?

Answer 21

They add it as a corrective tax

Question 22

How to calculate market demand for private good

how to calculate market demand for a public good

Answer 22

Add up the individual demand of each person! HORIZONTALLY!!!!!!

ADD UP THE INDIVDUAL DEMAND CURVES OF EACH PERSON VERTICALLY

Question 23

Difference between demadn curve of a private good and public good

Answer 23

Value of private good is the amount that ONE customer is willing to pay for one more unit

Value of public good is the amount that all customers are willing to pay for one more unit of it

Question 24

how to determine the marginal social cost of public good

Answer 24

SAME AS PRIVATE GOOD

MSC= MC +MARGINAL EXTERA COST

Question 25

Cost-benefit analysis - a study that compares the costs and benefits
to society of providing a public good

Answer 25

Cost-benefit analysis - a study that compares the costs and benefits
to society of providing a public good

Question 26

Why si cost benefit analysis hard to determine

Answer 26

why woul du tell the truth to a questionare lol?

Question 27

tragedy of the commons
-externality type
-explain

Answer 27

This can be thought of as a negative externality

the common resource tending to be overused from the standpoint of
society as a whole

Question 28

how is tragedy of the commons depicted

Answer 28

Shifting up of the supply curve )MARGINAL SOCIAL COST METHOD)

creates deadweight loss

Question 29

Source of tragedy of the commons?

Answer 29

Same as negativ externality
-lack of property rights
-lack of laws

social incentive: to protect the good
private incentive: to make money
THESE ARE DIFFERENT!

Question 30

solution to tragedy of commons

FIN!

Answer 30

enforcing strong community norms and traditions

legal restrictions through taxes (internalizing the externality) or quotas on production

turning the common nesource to a private good (offered protection)

Question 31

Why does the socially efficient outcome for a public good not occur naturally in the market

Answer 31

The market operates on making everyones marginal benefit=marginal cost

however marginal benefit is not cacluated the same way for public goods as they are funded by governments, to calculate the marginal social beenfit you have to add up the individual demand points vertically!!!!

Question 32

Margiinal social beenfit of a public good formula

Answer 32

Marginal benefit to person a+ Marginal benefit for person b

Question 33

3 types of public goods

Answer 33

1. national defnese
2. basic research
3. fighting poverty

Question 34

Examples of common resources

Answer 34

Uncongested roads

Wildlife

Clean air

Question 35

Why do governmetns try to prevent this misuse of common resources

Answer 35

To prevent overconsumption and to preserve

Question 36

How to calculate the deadweight loss from overfishing/negative externality

Answer 36

draw a line depicting the MARGINAL SOCIALL COST!!! higher than old cost curve

drop a line down that goes directly through the inefficient market equilibrium

the size of the triangle wherein marginal social cost is greater than the market equilibrium is DEADWEIGHT LOSS

Question 37

Difference in the value of public goods and value of private goods to consumers

Answer 37

private good: maximum
amount that ONE consumer is willing to pay for
one more unit of it.

public good: maximum
amount that ALLLLLLLLLLL the consumers are willing to
pay for one more unit of it