2.3.2 Public Goods

• Public goods are defined as goods or services that are non-rival and non-excludable.non-excludable
• Non-excludable means it is impossible to prevent people from consuming a good even if they don't pay
• Public goods often suffer from the free-rider problem, which leads to underproduction
• Non-excludable goods can be consumed by anyone regardless of payment.


  True
• What is the primary characteristic of a non-excludable good?

  Impossible to prevent consumption without payment
• How does the non-rival nature of public goods affect their consumption?

  One person's use does not reduce availability for others.
• Why do private firms have no incentive to provide public goods?

  Free-rider problem reduces profit
• Direct provision of public goods involves the government producing and supplying goods directly to consumers.


  True
• What are some examples of public goods provided by the government?

  National defense, public parks
• Two main ways the government can provide public goods

  1️⃣ Direct provision

  2️⃣ Indirect provision
• Non-rival means that one person's consumption of a good reduces its availability for others.

  False
• Match the characteristic with the correct type of good:

  Rival ↔️ Private goods

  Non-excludable ↔️ Public goods
• What does it mean for a good to be non-rival?

  One person's consumption does not reduce availability for others.
• The free-rider problem leads to underproduction of public goods because individuals consume without paying
• The free-rider problem arises because private firms cannot generate profit from non-excludable goods.

  True
• Public goods are non-excludable, meaning it is impossible to prevent people from consuming them even if they don't pay
• Methods the government uses to provide public goods:

  1️⃣ Direct provision

  2️⃣ Subsidies

  3️⃣ Regulations
• What are the two methods of indirect provision of public goods by the government?

  Subsidies and regulations
• The government plays a crucial role in providing public goods because the free market fails due to the free-rider problem.free-rider
• Direct provision involves the government producing and supplying public goods directly.

  True
• What is an example of a government regulation to ensure the provision of public goods?

  Mandating street lights
• What are the two characteristics of public goods?

  Non-rival, non-excludable
• What does non-excludability mean for public goods?

  Cannot prevent consumption
• The free-rider problem leads to the underproduction of public goods because individuals consume without paying.paying
• Consumption of a non-rival good by one person does not reduce its availability for others.


  True
• Private firms have no incentive to provide public goods because they cannot exclude non-payers and generate a profit.profit
• What is the free-rider problem in the context of public goods?

  Consuming without paying
• National defense is an example of a public good.

  True
• What is one method the government uses to address the free-rider problem in public goods?

  Direct provision
• What is direct provision in the context of public goods?

  Government directly produces public goods
• Government regulations can mandate private companies to contribute to national defense.


  True
• Public goods are non-rival, meaning one person's consumption does not reduce their availability for others
• What is the rivalry characteristic of private goods?

  Consumption reduces availability
• Why does the free-rider problem lead to underproduction of public goods?

  People benefit without paying
• Public education is a public good because one student's learning does not reduce others' access.


  True
• Public goods often suffer from the free-rider problem, which leads to their underproduction
• Why does the free market fail to provide public goods efficiently?

  The free-rider problem
• Methods used by the government to address market failure in providing public goods

  1️⃣ Direct Provision

  2️⃣ Subsidies

  3️⃣ Regulations
• Subsidies are financial support given to private firms to produce public goods, making them financially viable.
• How does the government overcome the free-rider problem in providing public goods?

  Tax revenue