1. Q: Why does the government provide public goods?

2. Economics Quiz
Who wrote, “In this world nothing is certain but death and taxes”?
Who was the author of the Wealth of Nations?
Which US president used the motto, “It’s the economy stupid.”
What does TNSTAAFL mean?

3. Economics Quiz with Answers
Who wrote, “In this world nothing is certain but death and taxes”?
Benjamin Franklin
Who was the author of the Wealth of Nations?
Adam Smith
Which US president used the motto, “It’s the economy stupid.”
Bill Clinton
What does TNSTAAFL mean?
There’s no such thing as a free lunch

4. I. Public Goods
Public goods and services give benefits to payers and non-payers.
Characteristics of public goods:
1. Non-excludable - impractical or impossible to exclude non-payers
2. Non-rival – consumers can consume the good simultaneously

5. II. Free Rider Problem
Producers (businesses) have little/no incentive to
produce public goods because…
B. Free riders are examples of a market failure –

6. Laissez Fire

8. “BP: In Deep Water”

10. Externalities
1. Economic side effects – can be created by both public and private sectors
a. Can be positive or negative
Ex: a new freeway is built
Positive: gas stations located near exits will make higher profits $$
Negative: Pollution caused by the cars on the freeway

11. 2. Government encourages the creation of positive externalities
Ex. education
and tries to limit negative externalities
Ex. EPA regulates pollution