Week 23 Flashcards
Private goods definition (2 characteristics)
example: pizza
Public goods definition ( 2 characteristics)
example: lighthouse
free rider problem example
How does the free rider problem lead to market failure
free riders cause missing markets which leads to complete market failure
Pure public good definition
they are completely non-excludable and non-rival
non-pure public good definition and examples
what is the solution to the complete market failure caused by public goods and examples
the government steps in and provides these to avoid free-riders, army is payed for in general taxes so cannot be avoided
Tragedy of the commons definition
Example of tragedy of the commons
Shared access to the resource results in over exploitation of the resource
How does an absence of property rights lead to tragedy of the commons
what are the objectives of producers, consumers and society on their decisions
consumers and produces act to maximize their objectives and may not act on society and welfare
internal costs/benefits definition
external costs and benefits definition
social and private costs and benefits of consumption example and how does it lead to a negative externality of consumption
internal = green
external = red
if the individal smokes despite it being beneficial to society for them not to
> it is a negative externality of consumption
2 reasons goods are under or over provided (merit and demerit goods)
Evaluation for merit and demerit goods
what does demand = and supply = on a marginal cost and benefit diagram
what curves (MPC or MPB) are we shifting when it is a production or a consumption externality
What direction do the curves shift if it is a positive or negative externality
how do you measure the size of an externality on a marginal C/B diagram
where are the social and private optimums on a positive externality of consumption on a marginal C/B diagram
the market will operate and the private optimum as consumers base their decisions off of their private benefits
how do you identify the over/under provision on a marginal C/B diagram
how do we establish the deadweight loss to society on a marginal C/B diagram
