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chapter 11 vocabulary

chapter 11 vocabulary - o common resources Goods that are...

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o common resources Goods that are rival in consumption but not excludable. o cost-benefit analysis A study that compares the costs and benefits to society of providing a public good. o excludability The property of a good whereby a person can be prevented from using it. o free rider A person who receives the benefit of a good but avoids paying for it. o private goods Goods that are both excludable and rival in consumption. o public goods Goods that are neither excludable nor rival in consumption. o rivalry in consumption The property of a good whereby one person's use diminishes other people's use. o Tragedy of the Commons A parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole. Chapter Recap: Summary o Goods differ in whether they are excludable and whether they are rival in consumption. A good is excludable if it is possible to prevent someone from using it. A good is rival in consumption if one person's use of the good reduces other people's ability to use the same unit of the good. Markets work best for private goods, which are both excludable and rival in consumption. Markets do not work as well for other types of goods. o Public goods are neither rival in consumption nor excludable. Examples of public goods include fireworks displays, national defense, and the creation of fundamental knowledge. Because people are not charged for their use of the public good, they have an incentive to free ride when the good is provided privately. Therefore, governments provide public goods, making their decision about the quantity of each good based on cost–benefit analysis. o Common resources are rival in consumption but not excludable. Examples include common grazing land, clean air, and congested roads. Because people are not charged for their use of common resources, they tend to use them excessively. Therefore, governments use various methods to limit the use of common resources.
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