Chapter 3 - Public Goods
Public Good - A shared good or service for which it would be inefficient or impractical to make
consumers pay individually and to exclude those who did not pay (examples: postal service, police
department, fire department)
Public Sector - The part of the economy that involves the transactions of the government (example:
public school teacher)
Private Sector - The part of the economy that involves the transactions of individuals and businesses
Infrastructure - The basic facilities that are necessary for a society to function and grow (examples:
water treatment systems, interstate highways, bridges)
Market Failure - A situation in which the free market, operating on its own, does not distribute
resources efficiently
Externality - An economic side effect of a good or service that generates benefits or costs to someone
other than the person deciding how much to produce or consume
Welfare - Government aid to the poor
