Public Goods and Externalities

The video explains the concept of public goods, highlighting their importance in a free market economy. It discusses how public goods like bridges are funded through taxes and the challenges of excluding non-payers. The debate over what should be public goods is explored, using education as an example. The free-rider problem is introduced, illustrating the issues with voluntary contributions for public goods. Externalities, both positive and negative, are explained, showing their impact on society and the economy.

Why is it impractical to exclude non-payers from using a public good like a bridge?

• Because it would not reduce the benefits to any user

• Because it would increase the cost of the bridge

• Because it would cause traffic congestion

• Because it is difficult to monitor who uses the bridge

What is a common reason for political debate regarding public goods?

• The efficiency of private companies

• The alignment of tax spending with personal values

• The cost of maintaining public goods

• The environmental impact of public goods

What is the free-rider problem?

• When people pay more than their fair share for public goods

• When public goods are underutilized

• When people benefit from public goods without paying for them

• When public goods are overfunded

How might the free-rider problem affect public goods if taxes were not collected?

• Public goods would lack funding and become unavailable

• Public goods would be overfunded

• Public goods would become more efficient

• Public goods would be privatized

What is an externality in economic terms?

• A direct cost paid by consumers

• A side effect that affects a third party

• A benefit received by the government

• A tax imposed on public goods

Which of the following is a positive externality of building a bridge?

• Increased traffic congestion

• Disruption of local businesses

• Creation of construction jobs

• Increased air pollution

Why do some economists believe the private sector generates positive externalities more efficiently?

• Because it focuses on public goods

• Because it is less regulated

• Because it operates at a lower cost to taxpayers

• Because it has more resources