Public Goods and the Free-Rider Problem Flashcards

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Note: We may include questions that have multiple correct answers. It's useful to remember specific examples to understand these concepts better.

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What is a public good?

A good that is non-excludable and non-rivalrous. You cannot stop non-payers, and one person’s use does not reduce others’ use.

What does non-excludable mean?

You cannot stop people who do not pay from using the good.

What does non-rivalrous mean?

One person’s use does not reduce how much is left for others.

Name two public goods.

Street lighting and national defence.

What is a free rider?

Someone who benefits from a good without paying for it.

What is the free rider problem?

Because people can free ride, they do not pay. The market then provides too little of the good.

Why might private firms not provide public goods?

They cannot make people pay, so they cannot cover costs or make profit.

How can the government ensure public goods are provided?

It can provide them directly and pay for them with taxes.

What is a quasi-public good?

A good with some public good features, but not all. For example, a road that gets crowded or has a toll.

Does ‘public’ in public good mean government-provided?

No. It means the good is non-excludable and non-rivalrous, whoever provides it.