Economics class notes
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apr9-efficiency.md 686B

April 9 Efficiency

Market failure is an inability of a market to find an efficient solution

Pollution is a market failure

A public good is nonrival and nonexcludable

  • A good is nonexcludable if it is not possible to prevent others from consuming it

  • A good is nonrival if one person’s consumption of the good does not make it impossible for others to consume it.

Problems with public goods

  • The Tragedy of the Commons is that nonexcludable but rival goods become overused

  • Little Incentive to supply the good privately

  • The free-rider problem is that people take advantage of the public resource

  • The drop in the bucket problem is when