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Unformatted text preview: PADP 6950: Founda1ons of Policy Analysis Public Goods Angela Fer1g, PhD Recall the Efficiency Ra1onale In general, the existence of a market failure provides an "efficiency ra1onale" for government interven1on The government's role is to increase efficiency by altering the price signals faced by agents so that they take into account the full social costs and benefits of their ac1ons We discussed externali)es last 1me. This 1me we will discuss public goods. 1 Private Goods A private good is a good with the following two characteris1cs: Rival: if one person benefits from the good, it prevents anyone else from benefi1ng from it Excludable: those who do not pay for the good can be excluded from consuming it The demand curve for a private good is the horizontal summa1on of the demand curves of the individual consumers. Private markets provide efficient quan11es of private goods as long as no externali1es exist Because marginal social benefit (demand) equals marginal social cost (s...
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This note was uploaded on 01/18/2012 for the course PADP 6950 taught by Professor Fergi during the Spring '11 term at UGA.

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