A public good is a good that is beneficial to society but will not be provided by private firms due to its non-excludability and non-rivalry .

Which two characteristics allow firms to earn profits from private goods?

Firms can earn profits from private goods because they are excludable and rivalrous .

True or False? If left to the free market, private firms will provide public goods.

False. Private firms will not provide public goods, so under-provision (or no provision) occurs in society.

Non-rivalry refers to the inability of a product to be used up, so there is no competitive rivalry in consumption.

Non-excludability refers to the inability of private firms to certain customers from using their products.

Non-excludability refers to the inability of private firms to exclude certain customers from using their products.

Give two examples of public goods.

Examples of public goods include roads , parks , lighthouses and national defence .

Define the free rider problem .

The free rider problem is a situation where consumers can access a good without paying for it, relying on other paying customers.

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

The three government responses are to do nothing , to provide the good themselves , or to contract out provision to private companies.

Unlike public goods, private firms will provide some goods because they can make a profit from them.

Unlike public goods, private firms will provide some merit goods because they can make a profit from them.

True or False? There is no opportunity cost when a government funds the provision of a public good.

False. There is an opportunity cost to any government funding decision, as the funds could have been used for the next best alternative.

Define private good .

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

What eventually happens to a public good's provision because of the free rider problem?

Because paying customers eventually stop paying, firms cease to provide the good and it becomes under-provided in society.

IBEconomicsDPSLFlashcards2. Microeconomics2.9 Market Failure: Public Goods

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

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Front2.9.1 Public Goods
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 will not be provided by private firms due to its non-excludability and non-rivalry.
Which two characteristics allow firms to earn profits from private goods?
Firms can earn profits from private goods because they are excludable and rivalrous.
True or False?
If left to the free market, private firms will provide public goods.
False.
Private firms will not provide public goods, so under-provision (or no provision) occurs in society.
Define non-rivalry.
Non-rivalry refers to the inability of a product to be used up, so there is no competitive rivalry in consumption.
Non-excludability refers to the inability of private firms to certain customers from using their products.
Non-excludability refers to the inability of private firms to exclude certain customers from using their products.
Give two examples of public goods.
Examples of public goods include roads, parks, lighthouses and national defence.
Define the free rider problem.
The free rider problem is a situation where consumers can access a good without paying for it, relying on other paying customers.
What are the three possible government responses to the under-provision of public goods?
The three government responses are to do nothing, to provide the good themselves, or to contract out provision to private companies.
Unlike public goods, private firms will provide some goods because they can make a profit from them.
Unlike public goods, private firms will provide some merit goods because they can make a profit from them.
True or False?
There is no opportunity cost when a government funds the provision of a public good.
False.
There is an opportunity cost to any government funding decision, as the funds could have been used for the next best alternative.
Define private good.
A private good is a good that firms are able to provide to generate profits because it is excludable and rivalrous.
What eventually happens to a public good's provision because of the free rider problem?
Because paying customers eventually stop paying, firms cease to provide the good and it becomes under-provided in society.

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