Wednesday, October 1, 2014

Market Failure 6 - Public Goods

Market Failure - Public Goods

Public Goods - are non-excludable & non-rivalrous.
  • non-excludable - it is not possible to prevent people who have not paid for a good from using                                 it. 
  • non-rivalrous - consumption of the good by one person does not prevent others from also                                    consuming it. 
Free-riders are those who can use a good without paying for it.
Examples given: National Defense - it is not possible to exclude anyone within a country's borders while at the same time protecting those borders. Individuals are protected if they have paid or not. 

mjmfoodie on Public Goods- 

2005 AP Microeconomics Exam
Answer (B) an increase in the optimal quantity of the good.