Chapter 11: Public Goods And Common Resources

both public goods and common resources.

common resources and private goods.

The government does not know the exact willingness of consumers to pay for the public good. Taxpayers do not agree on the optimal quantity of the public good that the government should provide.

regulation taxes turning the common resource into a private good

some item of value does not have an owner with the legal authority to control it.

refers to the property of a good whereby a person can be prevented from using it

refers to the property of a good whereby one person's use diminishes other people's use.

Are both excludable and rival

Are neither excludable nor rival Gives rise to positive externalities

Are rival but not excludable Gives rise to negative externalities

Are excludable but not rival

is a person who receives the benefit of a good but avoids paying for it

prevents private markets from supplying public goods. exists for any good that is not excludable.

The government can decide to provide the public good if the total benefits exceed the costs The government can make everyone better off by providing the public good and paying for it with tax revenue

refers to a study that compares the costs and benefits to society of providing a public good

the total costs and benefits of the project to society as a whole

National Defense Basic Research Fighting Poverty

is a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole.

can solve the problem Regulation or taxes to reduce consumption of the common resource Turn the common resource into a private good

Clean air and water Congested roads Fish, whales, and other wildlife

The market fails to allocate resources efficiently when property rights are not well-established. When the absence of property rights causes a market failure, the government can potentially solve the problem.

if it is possible to prevent someone from using it

if one person's enjoyment of the good prevents other people from enjoying the same unit of the good.

neither rival nor excludable.

public goods, making quantity decisions based upon cost-benefit analysis.

rival but not excludable, Because people are not charged for their use of common resources, they tend to use them excessively Governments tend to try to limit the use of common resources