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Chapter 11 Notes

Chapter 11 Notes - Difficult for private markets to provide...

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Chapter 11 Important characteristics of goods - A good is excludable if a person can be prevented from using it. Excludable: fish tacos, dial-up internet Not excludable: National defense - A good is rival in consumption of one persons use of it diminishes others’ use. rival: fish taco Not a rival: Tornado siren Different types of goods - Private goods Excludable, rival in consumption Food - Public goods Not excludable, not rival National defense - Common resources Rival but not excludable Fish in the ocean - Natural monopolies Excludable but not rival Cable TV - Public goods
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Unformatted text preview: Difficult for private markets to provide because of the free-rider problem. Free rider problem: A person who receives the benefit of a good but avoids paying for it. • National defense, knowledge through research, welfare If the benefit of a public good exceeds the cost of providing it, the government should provide the good and pay for it with a tax on people who benefit Cost-benefit analysis: A study that compares the cost and benefits of providing a public good.-Common resources-- Like public goods, common resources are not excludabe....
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