LS18 - Public Goods Flashcards

1
Q

Non-rivalrous

A

Consumption of a product doesn’t prevent another person from consuming that product

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2
Q

Non-excludable

A

Once a good is provided, it is impossible to stop people from using it

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3
Q

Free-rider problem

A

Type of market failure that occurs because everybody is able to benefit from them. Free riders are a problem because while not paying for it people can still use it. Leading to the good being under provided or not provided at all

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4
Q

Social benefits

A

Private benefits + external benefits

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5
Q

Social costs

A

= private costs + external costs

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6
Q

Positive externality

A

Social benefit doesn’t equal private benefit as external benefits are present

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7
Q

Negative externality

A

Social cost does not equal private costs since external costs are present

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8
Q

Social optimal level of output

A

Occurs where all external benefits and external costs are accounted for

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9
Q

What happens if external benefits are present in a free market

A

Underconsumption/underproduction

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10
Q

What happens in a free market if external costs are present

A

Overconsumption/overproduction

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