AP Microeconomics AMSCO Guided Notes
6.3: Public and Private Goods
AP Microeconomics Guided Notes
AMSCO 6.3 - Public and Private Goods
Essential Questions
- Why can markets supply only private goods efficiently?
I. Private Goods and Public Goods
1. What is the key difference between a private good and a public good?
A. Private Goods
1. What does it mean for a good to be excludable, and how does this characteristic affect consumers?
2. What does it mean for a good to be rival in consumption, and what happens when demand for a private good increases?
3. Why are private markets generally effective at supplying private goods?
B. Public Goods
1. What does it mean for a good to be non-excludable, and what is an example of how this affects access?
2. What does it mean for a good to be non-rival in consumption, and how does this differ from private goods?
3. What are common goods and club goods, and how do they differ from pure public goods?
II. When Public Goods Become Private
1. How did market forces affect the classification of firefighting services in California during the 2019 wildfires?
III. Free Riders and Public Goods
1. Why are people often unwilling to pay for public goods, and how does scarcity of resources influence this behavior?
A. Free Riders and Commonly Held Resources
1. What is a free rider, and how did free riders create a problem on Boston Common in colonial times?
2. What solution did Boston implement in 1646 to address the free rider problem on Boston Common?
IV. Government Production of Public Goods
1. Why do governments typically step in to produce public goods when private individuals and companies refuse to pay for them?
2. How does the free rider problem affect the ability of private producers to assess demand for public goods?
3. What does the preamble to the U.S. Constitution suggest about the government's role in providing public goods?
V. Comparing Public and Private Services
1. How do publicly funded universities like UC Berkeley and privately funded universities like Stanford compete in the marketplace?
2. What does the example of tap water versus bottled water demonstrate about consumer behavior and the existence of private alternatives?
VI. Government Regulation of Natural Resources
A. Open Access Resources
1. What are open access resources, and why are they both non-excludable and rival?
2. What problem can occur when open access resources like Yellowstone National Park experience increased visitor numbers?
B. Private Individuals and Open Access Resources
1. What is inefficient overconsumption of open access resources, and why do private individuals engage in it?
2. What methods can governments use to control overconsumption of open access resources?
Key Terms
private good
excludable
non-rival
public good
rival