Topic 5: Public Goods Flashcards
1
Q
explain rival in consumption
A
one person’s use diminishes other people’s use (consuming one unit= no one else can use)
2
Q
explain excludable
A
property of good where a person can be prevented from using it (only those who pay receive)
3
Q
which goods are related to externalities and why
A
public goods + common resource
- Goods that are non-excludable (// available free of charge) relate to externalities
o As something of value has no price attached
4
Q
why does public good create market failure
A
Free-Rider Problem: person receiving benefit but does not pay for it
5
Q
why does common resource create market failure
A
o No individual interest to withhold from resource
o Tend to be EXPLOITED
6
Q
how can tragedy of commons be rectified
A
private property rights
