Introduction to Public Goods and Externalities

Flashcards covering key concepts from the lecture on public goods, their characteristics, examples, and implications for government and individual choices.

What are the characteristics of a public good?

Public goods are nonrival and nonexcludable.

What does nonrival mean in the context of public goods?

Nonrival means that one person's consumption does not impact another's consumption.

Give an example of a public good.

National defense is a classic example of a public good.

What does nonexcludable mean in relation to public goods?

Nonexcludable means that it's not possible or extremely difficult to exclude someone from using it.

What are private goods?

Goods that are both rival and excludable, such as food, clothes, and gasoline.

What are common resources?

Goods that are rival but nonexcludable, such as fish in the ocean.

What are quasi public goods or club goods?

Goods that are nonrival but excludable, such as paid streaming video.

What is the free rider problem?

The free rider problem occurs when individuals have no incentive to pay for a public good because they cannot be excluded from consuming it.

Why is government intervention often necessary for public goods?

Because private companies typically would not provide public goods, as consumers do not have to pay to enjoy their benefits.

How can the classification of goods impact government and individual decision making?

Understanding the differences between private and public goods, club goods, and common resources is important for making decisions about how these goods are provided.