A public good is a good that is beneficial to society but which private firms will not provide because it is non-excludable and non-rivalrous .

What are the two defining characteristics of a public good?

The two characteristics are that a public good is non-excludable and non-rivalrous .

True or False? A public good is the same as a merit good.

False. Private firms will not provide public goods at all, whereas they will provide some merit goods because they can make a profit from them.

Define private good .

A private good is a good that firms are able to provide to generate profits because it is excludable and rivalrous .

Private goods generate profits for firms because they are excludable and .

Private goods generate profits for firms because they are excludable and rivalrous .

Define non-excludability .

Non-excludability refers to the inability of private firms to exclude certain customers from using their product, so the price mechanism cannot be used to exclude non-payers.

How does the provision of merit goods differ from that of public goods?

Private firms provide some merit goods because they can profit from them, so there is some provision, whereas public goods receive no provision or are under-provided.

Non-rivalry refers to the inability of a product to be used up, so there is no competitive rivalry in consumption to drive up prices and generate profits for firms.

What is the free rider problem?

The free rider problem is where customers can access a good without paying for it, so paying customers eventually stop paying and firms cease to provide it, leading to under-provision .

True or False? Contracting out means the government always provides the good itself.

False. Contracting out means the government accepts bids from private companies and pays the lowest bidder to provide the good or service.

What are the three government responses to the under-provision of public goods?

The government can do nothing , provide the good itself , or contract out provision to a private company.

There is an to any government funding decision to provide a public good.

There is an opportunity cost to any government funding decision to provide a public good.

IBEconomicsDPHLFlashcards2. Microeconomics2.9 Market Failure: Public Goods

2.9 Market Failure: Public Goods (DP IB Economics: HL): Flashcards

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Define public good.

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Cards in this collection (12)

Define public good.
A public good is a good that is beneficial to society but which private firms will not provide because it is non-excludable and non-rivalrous.
What are the two defining characteristics of a public good?
The two characteristics are that a public good is non-excludable and non-rivalrous.
True or False?
A public good is the same as a merit good.
False.
Private firms will not provide public goods at all, whereas they will provide some merit goods because they can make a profit from them.
Define private good.
A private good is a good that firms are able to provide to generate profits because it is excludable and rivalrous.
Private goods generate profits for firms because they are excludable and .
Private goods generate profits for firms because they are excludable and rivalrous.
Define non-excludability.
Non-excludability refers to the inability of private firms to exclude certain customers from using their product, so the price mechanism cannot be used to exclude non-payers.
How does the provision of merit goods differ from that of public goods?
Private firms provide some merit goods because they can profit from them, so there is some provision, whereas public goods receive no provision or are under-provided.
Define non-rivalry.
Non-rivalry refers to the inability of a product to be used up, so there is no competitive rivalry in consumption to drive up prices and generate profits for firms.
What is the free rider problem?
The free rider problem is where customers can access a good without paying for it, so paying customers eventually stop paying and firms cease to provide it, leading to under-provision.
True or False?
Contracting out means the government always provides the good itself.
False.
Contracting out means the government accepts bids from private companies and pays the lowest bidder to provide the good or service.
What are the three government responses to the under-provision of public goods?
The government can do nothing, provide the good itself, or contract out provision to a private company.
There is an to any government funding decision to provide a public good.
There is an opportunity cost to any government funding decision to provide a public good.

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