ECON 201 EXAM 3
1. how do we classify goods? four characteristics: 1. rivalry in consumption
2. non rivalry in consumption
3. excludability
4. non excludability
2. the situation that occurs when one person's consuming a unit of a good means
1. no one else can consume it or
2. diminishes other people's use of that unit of good: rivalry in consumption
3. goods can run out (scarce): rivalry of consumption
4. examples of rivalry in consumption: software with a license key, sales of a theatre tickets
5. one person's consumption
1. does not limit someone else from consuming or
2. does not diminishes someone else's use: non-rivalry in consumption
6. goods never run out (not scarce): non rivalry in consumption
7. examples of non rivalry in consumption: use of search engine, watching an online video
8. the situation in which anyone does not pay for a good cannot consume it or can be prevented from
using it: excludability
9. a person cannot be prevented from using it: non excludability
10. public goods are...: non excludable and non rivalry in consumption
11. private goods are...: excludable and rival in consumption
12. common resources are...: non excludable and rival in consumption
13. club goods are...: excludable and non rival in consumption
14. explain non excludable: a person uses this good they cannot prevent someone from using it
15. explain non rival: one persons use does not diminishes another persons use of that good
16. individuals that benefit without paying: free riders
17. examples of free rider situations: 1. group project one person doesn't do it and gets the grade
2. people who download music illegally
3. people who watch a street performance and don't pay
4. teenagers who live at home and don't have a job
18. the free rider problem lead to: a concept of market failure when people benefit from goods
and services and not paying for it and if too many free riders then we see this good or service
be under-provided
19. what classification do you see the free-rider problem and market failure: -
non excludability
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, ECON 201 EXAM 3
20. due to the existence of free riding markets...: fail in the provision of public goods
21. market failure happens when...: private markets under-provide public goods
22. important public goods; public goods the government provide that every- one benefits from: 1.
national defense
2. basic research
3. fighting poverty
- welfare system
- food stamps
- government and housing programs
23. can government provide public goods at efficient levels?: yes
24. how does the government provide public goods at efficient levels: making everyone
responsible for it through taxation
25. how does the government decide whether to provide a public good or not: they use a cost
benefit analysis
26. a study that compares the costs and benefits to society of providing a public good: cost-
benefit analysis
27. common resource problem names: common access resource problem, tragedy of the
commons, common pool problem
28. when the property rights of this good is not defined individuals will tend to overuse this resource
you cant prevent someone from uses it because this resource is scarce as more use this resource the
less and less of this resource will survive, negative externalities:
29. examples of common resource problems: wildlife, bathroom/ kitchen in the dorm, fishing or
overfishing, garbage, bathrooms in gatton, greenhouse gasses, overgrazing. population
growth, deforestation, non renewable resources
30. solutions for common resource problems: think of how to reduce negative ex- ternalities,
government can step in and regulation or convert this common resource to a private good so
we can manage and oversee this resource and ensure they are not going extinct
31. problem of overuse of a resource when property rights not clearly estab- lished: common access
resource problem, tragedy of the commons, common pool problem
32. primary goal of each firm: maximize profits, minimize costs
33. how you get your total profit: total revenue - total cost
34. the amount a firm receives for the sale of its output: total revenue
35. the market value of the inputs a firm uses in production: total cost
36. where the principle hires the agent to complete a certain task, however any action this agent
takes can impact the principle: principle agent relationships
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7
1. how do we classify goods? four characteristics: 1. rivalry in consumption
2. non rivalry in consumption
3. excludability
4. non excludability
2. the situation that occurs when one person's consuming a unit of a good means
1. no one else can consume it or
2. diminishes other people's use of that unit of good: rivalry in consumption
3. goods can run out (scarce): rivalry of consumption
4. examples of rivalry in consumption: software with a license key, sales of a theatre tickets
5. one person's consumption
1. does not limit someone else from consuming or
2. does not diminishes someone else's use: non-rivalry in consumption
6. goods never run out (not scarce): non rivalry in consumption
7. examples of non rivalry in consumption: use of search engine, watching an online video
8. the situation in which anyone does not pay for a good cannot consume it or can be prevented from
using it: excludability
9. a person cannot be prevented from using it: non excludability
10. public goods are...: non excludable and non rivalry in consumption
11. private goods are...: excludable and rival in consumption
12. common resources are...: non excludable and rival in consumption
13. club goods are...: excludable and non rival in consumption
14. explain non excludable: a person uses this good they cannot prevent someone from using it
15. explain non rival: one persons use does not diminishes another persons use of that good
16. individuals that benefit without paying: free riders
17. examples of free rider situations: 1. group project one person doesn't do it and gets the grade
2. people who download music illegally
3. people who watch a street performance and don't pay
4. teenagers who live at home and don't have a job
18. the free rider problem lead to: a concept of market failure when people benefit from goods
and services and not paying for it and if too many free riders then we see this good or service
be under-provided
19. what classification do you see the free-rider problem and market failure: -
non excludability
1/
7
, ECON 201 EXAM 3
20. due to the existence of free riding markets...: fail in the provision of public goods
21. market failure happens when...: private markets under-provide public goods
22. important public goods; public goods the government provide that every- one benefits from: 1.
national defense
2. basic research
3. fighting poverty
- welfare system
- food stamps
- government and housing programs
23. can government provide public goods at efficient levels?: yes
24. how does the government provide public goods at efficient levels: making everyone
responsible for it through taxation
25. how does the government decide whether to provide a public good or not: they use a cost
benefit analysis
26. a study that compares the costs and benefits to society of providing a public good: cost-
benefit analysis
27. common resource problem names: common access resource problem, tragedy of the
commons, common pool problem
28. when the property rights of this good is not defined individuals will tend to overuse this resource
you cant prevent someone from uses it because this resource is scarce as more use this resource the
less and less of this resource will survive, negative externalities:
29. examples of common resource problems: wildlife, bathroom/ kitchen in the dorm, fishing or
overfishing, garbage, bathrooms in gatton, greenhouse gasses, overgrazing. population
growth, deforestation, non renewable resources
30. solutions for common resource problems: think of how to reduce negative ex- ternalities,
government can step in and regulation or convert this common resource to a private good so
we can manage and oversee this resource and ensure they are not going extinct
31. problem of overuse of a resource when property rights not clearly estab- lished: common access
resource problem, tragedy of the commons, common pool problem
32. primary goal of each firm: maximize profits, minimize costs
33. how you get your total profit: total revenue - total cost
34. the amount a firm receives for the sale of its output: total revenue
35. the market value of the inputs a firm uses in production: total cost
36. where the principle hires the agent to complete a certain task, however any action this agent
takes can impact the principle: principle agent relationships
2/
7
