(BQ) Part 2 book "Economic" has contents: Public choices and public goods, economics of the environment, markets for factors of production, economic inequality, uncertainty and information, monitoring jobs and inflation, economic growth, money, the price level, and inflation, aggregate supply and aggregate demand,.and other contents. | PART FIVE Market Failure and Government After studying this chapter, you will be able to: ᭜ Explain why some choices are public choices and how these choices are made in the political marketplace ᭜ Explain how the free-rider problem arises and how the quantity of public goods is determined ᭜ Explain why mixed goods with external benefits lead to inefficient underproduction and how public production, subsidies, and vouchers can achieve allocative efficiency F ighting a California wildfire, screening passengers at an airport, providing 16 good schools and colleges, defending the nation’s borders and interests around the globe, policing neighborhoods and highways, operating courts and a legal system: Governments are involved in all these activities. But why? Why does government provide some goods and services and not others? Why don’t we leave it to private firms to provide and sell all goods and services? Do governments overprovide or underprovide—provide too much or too little? These are the questions we study in this chapter. We begin by classifying goods and services and explaining the economic theory of why and how governments intervene in markets, or even replace them. We apply this theory to the provision of public services. Two such public services are education and health care. You will see how the political marketplace provides these services. In Reading Between the Lines at the end of the chapter, we look at some of the strengths and weaknesses of the 2010 Affordable Care Act. PUBLIC CHOICES AND PUBLIC GOODS 371 372 Chapter 16 Public Choices and Public Goods ◆ Public Choices All economic choices are made by individuals, but some choices are private and some are public. A private choice is a decision that has consequences for only the person making it. Decisions to buy (demand) or to sell (supply) goods and services in competitive markets are examples of private choices. At the market equilibrium price, these choices are consistent and one .
