Chapter 11 Public Goods and Common Resources

Excludability

The property of a good whereby a person can be prevented from using it.

Rivalry in consumption

The property of a good whereby one person’s use diminishes other people’s use.

Private goods

Goods that are both excludable and rival in consumption.

Public goods

Goods that are neither excludable nor rival in consumption.

Common resources

Goods that are rival in consumption but not excludable.

Club goods

Goods that are excludable but not rival in consumption.

Free rider problem

A situation where a person receives the benefit of a good but does not pay for it.

Cost–benefit analysis

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

Tragedy of the Commons

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

National Defense

A classic example of a public good that is neither excludable nor rival in consumption.

Basic Research

General knowledge that is a public good and is not excludable or rival in consumption.

Congested roads

A common resource often subject to overuse and requiring regulation.

Negative externality

A cost imposed on third parties by the consumption or production activities of others.

Positive externality

A benefit conferred on third parties by the consumption or production activities of others.

Government intervention

Actions taken by the government to correct market failures and improve resource allocation.

Environmental degradation

The deterioration of the environment through depletion of resources and pollution.

Congestion pricing

A strategy to reduce traffic by charging higher tolls during peak usage times.

Hunting and fishing licenses

Government regulations to manage the use of common resources and maintain wildlife populations.

Social welfare programs

Government initiatives aimed to address poverty and assist low-income families.

Subsidy

A financial assistance provided by the government to promote economic activity.

Public goods provision

The process by which the government supplies goods that are not adequately provided by the market.