1. Lindquist Economics CH 7.3
Role of Government
Lindquist
Economics
CH 7.3

2. Bellringer: Let’s compare 2 goods.
An APPLE and POLICE PROTECTION
If you don’t pay for an apple at the store, can you be kept from receiving an apple at the store?
If you don’t pay for police protection, can you be prevented from receiving police protection?
If one person eats an apple, does this prevent others from eating the same apple?
If one person receives police protection, does this prevent others from receiving protection?
Who benefits from consuming an apple?
Who benefits from police protection?
WHICH IS A PUBLIC GOOD? Which is Private?

3. Tips to remember…
How do I know if a good is “PUBLIC” or “PRIVATE”?????
Shared (NON-Rival) Consumption:
Many people receive the benefits of a good or service at one time. (PUBLIC)
If private: Benefits received by ONE Consumer.

4. Tips to remember PUBLIC GOODS…
2. NON-Exclusion:
People cannot be prevented from using a good or service even if they did not pay for the good or service.
Those that did NOT pay are called: “FREE RIDERS”

5. Private Goods vs. Private Goods
Place each good or service in one of the four boxes on the practice worksheet.
Rival & Excludable
Rival & Non-Excludable
Non-Rival & Excludable
Non-Rival & Non-Excludable

6. REVIEW: 5 types of Market Failures
Public Goods
Externalities
Inadequate Competition
Inadequate Information
Resource Immobility

7. Role(s) of Government Maintaining Fairness and Competition (CH 7.3)
Correcting Market Failures (CH 7.3)
Providing Public Goods (CH 7.2)
Providing a Safety Net (CH 9-10)

8. PROVIDING PUBLIC GOODS
Police Department
Military
Roads
Fire Department
Schools
Parks
Bridges
Postal Service
And More

9. Maintaining Fairness & Competition
3. Inadequate Competition
&
4.Inadequate Information
HOW?
DENY MERGERS (Anti-Trust Legislation) to prevent monopolies.
REGULATE PRICES For Natural Monopolies
Laws to SHOW prices to consumers and Against FALSE ADVERTISING

10. CORRECTING MARKET FAILURES
REGULATING BUSINESS AND INDIVIDUALS
ELIMINATING EXTERNALITIES
Negative Externalities:
Protecting Consumers and Environment
EXAMPLE #1: POLLUTION at the Lake???
EPA (Environmental protection Agency, 1970)
EXAMPLE #2: “Pig Story”
FDA (Food and Drug Administration, 1907)

11. ENSURING PRIVATE PROPERTY RIGHTS
Protecting land of individuals
Promoting wise use of land
Allowing individuals to own property to gain profit
Protect property from others trying to use it.

12. Government
On Friday, We saw examples of Market Failures “Real-life” Examples.
After those two stories, we know the government is important and necessary, but many people often debate HOW MUCH Government we need.
ASSIGNMENT:
Businesses often argue there is too much regulation and it gets in the way of GROWTH.
For each statement, describe WHY the GOVT got involved & the EFFECT on “Small Business”.