The Government’s Role of providing public goods in Free Enterprise USA

Providing Public Goods Public good a shared good or service for which it would be impractical Examples: roads, dams Instead of: ‘making consumers pay individually’ The government Instead of ‘excluding non-payers’ The Government believes certain facilities should

Characteristics of Providing Public Goods Any number of consumers Increasing the number of consumers

Costs and Benefits of Public Goods The government steps in if they believe Cost is critical in determining whether or not something will be a public good When a good or service is public: The benefit to each individual is less than the cost Total benefits to society are greater than

Free-Rider Problem Free rider someone who would choose not to pay for a certain good or service, Free riders consume what they The free-rider problem suggests that if the government stopped collecting taxes and relied on voluntary contributions,

Market Failures Market failure a situation in which the market Building a road example if a free market regulated it, companies would not choose to build roads in low populated areas and charge tremendous

Positive externalities: Externality economic side effect of a good or service that generates benefits or costs Positive externalities: Part of the benefit of a good will be gained Negative externalities: Unintended costs paid for by someone

Government Goals The government encourages the The government aims to Examples: education benefits you as a student and also society benefits from an educated population The government aims to Examples: acid rain, pollution