Questions and Answers
Properties of pure public goods
Non-excludability from consumption and non-rivalry in consumption
Two reasons for market failure for pure public goods
Rational behavior that implies free-riding and positive prices being inefficient because marginal costs are zero.
Consequence of free-riding interfering with rational behavior
Price mechanism cannot allocate public goods efficiently because households that do not pay for the goods cannot be excluded from consumption.
Second welfare theorem influenced by
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