Economics 102: Chapter 9 Study Guide on Externalities and Public Goods

This set of flashcards includes key vocabulary terms and their definitions related to externalities, public goods, and market failures as discussed in Economics 102.

Negative Externality

An economic activity that has a negative spillover effect.

Positive Externality

An economic activity that has a positive spillover effect.

Coase Theorem

States that private bargaining will result in an efficient allocation of resources.

Pigouvian Tax

The tax necessary to incentivize a firm to produce the socially optimal level of output.

Pigouvian Subsidy

The subsidy necessary to make an economic agent increase consumption to the socially optimal level.

Rival Good

Goods that only one person can consume at a time.

Non-Rival Goods

Goods that more than one person at a time can consume.

Excludable Goods

Goods that must be paid for in order to consume them.

Non-Excludable Goods

Goods that can be consumed, even if they are not paid for.

Free Rider Problem

When an individual does not pay for a good because it is non-excludable.

Tragedy of the Commons

When common pool resources are overused.