Public Goods and Externalities

Which of these are negative externalities?

• If you play loud music at night, your neighbor may not be able to sleep

• If you produce chemicals and cause pollution as a side effect, then local fishermen will not be able to catch fish, losing income.

• If you drive a car, it creates air pollution and contributes to congestion. These are both external costs imposed on other people who live in the city.

• A Sriracha factor in LA was ordered by a judge to cease any activities contributing to an order "extremely annoying, irritating, and offensives to the senses"

• All of these are negative externalities.

What is a cost borne by a third party in a transaction called?

• Sunk cost

• Negative Externality

• Diminishing marginal utility

• Unfair cost

Which of these is NOT a role for government in a market economy?

• Provide for a military.

• Provide for infrastructure (roads, bridges, airports) that is too expensive for the market to provide.

• Provide a legal system to establish property rights and enforce contracts.

• Provide for police and fire protection.

• Set wages and prices to make sure they are fair.

•Neighbor playing loud music while you study?

• Negative Externality
• Positive Externality

What is one reason that local law enforcement is considered a public good?

• Everyone in the community benefits from it.

• Nobody in the community has to pay for it.

• Private firms make a profit from producing it.

•  Individual citizens pay directly for it.

Public goods are examples of market failure, because producing these goods in the free market

• shows that the free enterprise system cannot distribute resources.

• helps entrepreneurs learn how to distribute public resources.

• does not allow for the efficient distribution of resources.

• encourages private businesses to distribute resources efficiently.

Which of the following is an example of a positive externality resulting from an outdoor band concert?

• A pair of endangered birds leave their nest in a nearby tree when the concert starts.

• An elderly woman in her apartment hears a song that she liked as a child.

• A pizza parlor closes early, because all of its customers are at the concert.

• A traffic jam occurs as drivers hunt for parking spots near the concert.

Part of economy that involves transactions of government. Fund public goods.

• Public sector

• Private sector

• Business sector

• Capitalist sector.

Part of economy involving transactions of individuals & businesses

• Public sector

• Private sector

• Business sector

• Capitalist sector.

a shared good or service for which it would be impractical to make consumers pay individually and to exclude non-payers.

• private good

• normal good

• public good

• external good