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Governments can reduce the overconsumption of common resources by imposing regulations, taxes, or converting the resources into private goods.
Governments can reduce the overconsumption of common resources by imposing regulations, taxes, or converting the resources into private goods.
True
National defense is an example of a club good because it is non-rival but excludable.
National defense is an example of a club good because it is non-rival but excludable.
False
Cost-benefit analysis is an effective tool for determining the correct quantity of public goods that the government should provide.
Cost-benefit analysis is an effective tool for determining the correct quantity of public goods that the government should provide.
True
Which of the following is an example of a public good?
Which of the following is an example of a public good?
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The free-rider problem leads to market failure in the provision of public goods because:
The free-rider problem leads to market failure in the provision of public goods because:
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A resource is considered rival in consumption when:
A resource is considered rival in consumption when:
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The tragedy of the commons can best be solved by:
The tragedy of the commons can best be solved by:
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Which of the following is NOT a common resource?
Which of the following is NOT a common resource?
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Which of the following is NOT a problem associated with common resources?
Which of the following is NOT a problem associated with common resources?
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Which of the following is an example of a government solution to the overuse of a common resource?
Which of the following is an example of a government solution to the overuse of a common resource?
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Study Notes
Public Goods
- Public goods are non-rival and non-excludable.
- Non-rival means one person's consumption of the good does not prevent another person from consuming it.
- Non-excludable means it is difficult or impossible to prevent people from consuming the good, even if they don't pay for it.
- National defense is a club good because it is non-rival, but excludable.
Free-Rider Problem
- The free-rider problem occurs when individuals benefit from a good or service without contributing to its cost.
- This leads to market failure in the provision of public goods because private firms are unlikely to provide them.
- Cost-benefit analysis can be used to determine the quantity of public goods a government should provide.
Common Resources
- A common resource is rival but non-excludable.
- Rival means one person's consumption of the resource prevents another person from consuming it.
- Non-excludable means it is difficult to prevent people from using the resource.
- The tragedy of the commons is when individuals overuse a common resource because they do not have to pay for its use.
- This overuse can deplete the resource or lead to its degradation.
- The tragedy of the commons can be solved by government intervention, such as regulations or taxes.
- Government solutions can include privatization of the resource, regulation of its use, or taxes on its consumption.
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