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Chapter 11 - incentive Solved through internalizing the...

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Chapter 11 Excludable: can people be prevented from using the good Rivalry: can one person’s usage diminish other people’s usage Private goods: both excludable and rival Public goods: Goods that are neither excludable or rival ex. National defense, basic research (Subsidize and patents) and fighting poverty *Free-rider problem, don’t need to pay to receive benefits; Government pays * Public/private depends if the number of beneficiaries can be excluded from using the good. Common resources: rival but not excludable ex. Fish in the ocean, clean air/water, roads *road can be common/public depending on how congested it is *Tragedy of the commons: people neglect the negative externality and lack
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Unformatted text preview: incentive Solved through internalizing the externality, tax, regulations, divide up the land or permits Natural monopoly: excludable but not rival Gov provides some natural monopoly functions such as water, electricity etc. Public pools/ice rinks are provided so that low-income people can enjoy it. Uses cost-benefit analysis to determine which goods to provide * rough estimates since people tend to lie on survey/questionnaires Human worth based on wage determinants is about 10 million Market fails to allocate resources efficiently because property rights are not well established* gov regulations are needed...
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