Chapter 9 Market Failure: Imperfect Information, External Benefits, and External Costs

| February 14, 2018

If you can consume a good at the same time that others consume the same good,
the good is nonrival in consumption.

Protecting endangered species is NOT an example of a public good because there
are no external benefits associated with it.

Public goods are always provided by the government because private markets do
not have an incentive to provide them.

If you can consume a good without having to pay for it, the good must be
nonrival in consumption.

Fireworks on the night on July 4th are neither rival nor excludable.

The free-rider problem is larger for private goods than it is for public goods.

Alissa is studying for her principles of economics exam. She tells her study
partner that “Only a very small number of people ever get to become
astronauts and go into space. Therefore space exploration is not a public
good.” Do you agree? Explain.

Suppose that your local government provides drinking water and charges a 10
cent per gallon. Explain whether or not the drinking water is a public good.

Provide an intuitive explanation of the free-rider problem.

Explain intuitively why the market for a nonexcludable good fails to provide
efficient quantity.

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