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Public Goods and Government Intervention

Learn about public goods, common resources, and artificially scarce goods, and how government intervention can improve societal welfare. Explore market failures and efficient resource allocation in AP Microeconomics.

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Public Goods and Government Intervention

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  1. Module Micro: Econ: 40 76 Public Goods • KRUGMAN'S • MICROECONOMICS for AP* Margaret Ray and David Anderson

  2. What you will learnin thisModule: • How public goods are characterized and why markets fail to supply efficient quantities of public goods. • What common resources are and why they are overused. • What artificially scarce goods are and why they are under-consumed. • How government intervention in the production and consumption of these types of goods can make society better off. • Why finding the right level of government intervention is often difficult.

  3. Private Goods • Private goods are what we have studied thus far • Private goods have two characteristics. They are; • Excludable • Rival

  4. Public Goods • Public goods are; • Non-excludable • Non-rival

  5. Common Resources • Common resources are; • Non-excludable • Rival

  6. Artificially Scarce Goods • Artificially scarce goods are; • Excludable • Non-rival

  7. Markets Only Provide Private Goods Efficiently • Markets will not provide the efficient level of public goods • The efficient level of public goods is the quantity where MSC = MSB

  8. Providing Common Resources • Examples of common resources • The problem of overuse and the “Tragedy of the Commons” • Maintaining a common resource iphoto

  9. The Efficient Level of Artificially Scarce Goods • Example of artificially scarce good • MC of providing the good is zero • Firms can’t set price equal to zero

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