lesson 16

Question 1

monopoly

Answer 1

one dominant firm

Question 2

oligopoly

Answer 2

few dominant firms

Question 3

market failure

Answer 3

the free market fails to provide what we want, in the right quantities , at a price that reflects our satisfaction

Question 4

market power is =

Answer 4

monopoly power—> one firm dominates (over 25% of the market)

Question 5

what is a pure monopoly?

Answer 5

when you have 100% of the market

Question 6

what is a public good?

Answer 6

their use cannot be prevented and one persons use does not prevent another persons

Question 7

what is a private good?

Answer 7

owners are allowed to exert their property rights, they can exclude others by preventing them using the good

Question 8

2 characteristics of public goods

Answer 8

non-rival
non-excludable

Question 9

what does it mean when a public good is non-rival?

Answer 9

one persons consumption of the product does not prevent anyone else from using it

Question 10

what does it mean when a public good is non-excludable?

Answer 10

consumption of the product cannot be restricted to those who have paid for it

Question 11

free riders

Answer 11

• people who enjoy public goods without paying due to its non-excludability
• impossible to collect revenue so profits cannot be made and the incentive to provide the good disappears

Question 12

what is a quasi-public good?

Answer 12

(almost public goods)
they are not full rival or it might be possible to exclude people from consuming the product

Question 13

example of a quasi- public good?

Answer 13

roads

public highways are non-excludable and are mostly non-rival (my use does not affect your use)
HOWEVER during rush hours, roads are packed so MY use does affect YOUR use.
AS A RESULT the government may consider using technology to introduce road charging

Question 14

What can pure public goods never be provided through?

Answer 14

The market mechanism since it’s impossible to exclude free riders.
If the market won’t provide something which is needed then we have market failure

Question 15

Non rival

Answer 15

My consumption doesn’t effect yours

Question 16

Non excludable

Answer 16

Consumption cannot be restricted to those who offer to pay and free riders take advantage of this

Question 17

2 defining characteristics of public goods

Answer 17

Non rival and non excludable

Question 18

Why are roads quasi public goods?

Answer 18

They are mostly non rival except during rush hour where my use effects your use

Question 19

Reasons why the government should provide public goods

Answer 19

The can tax to produce on a large scale to enjoy economies of a scale

State provision prevents market failure

Only the government will provide because free riding leads to non production

Question 20

Reasons why the government should not provide public goods

Answer 20

They can get it wrong (the quantity and price that people want it for) so they are inefficient and poorly informed votes shape policies

Forced riders have to pay for policies they don’t support