Chapter 11

Chapter 11 builds off of the previous chapter by diving deeper into how government intervention can help keep a market from failing. The chapter also introduces 4 categories of goods. Those being private, public, common resource, and natural monopoly goods. Public goods are provided by the government and common resource goods are not excludable, but are rival and consumption. A good is excludable if it is possible to prevent someone from using it. On the other hand, a good is rival in consumption if a person's ability to consume the same good is hindered by another person. However, markets are best with private goods. Private goods are both excludable and rival in consumption. Although, markets do not work as well for other goods as private goods. Public goods are not rival in consumption or excludable. As public goods are not charged for, people have the incentive to free ride. A free rider is a person who receives the benefit of a good, but avoids paying for it.Therefore, public goods are provided by the government that makes the quantity of each good based on cost analysis. Cost benefit analysis is a study that compares the costs and benefits to society of providing a public good. Common resources on the other hand, are rival in consumption, yet not excludable. Since people are not charged for their use of common resources, they tend to use them excessively Thus, governments often use various means to limit the usage of common resources.