Skip to main content
Business LibreTexts

14.2: Introduction to Public Goods and Externalities

  • Page ID
    48466
  • What you’ll learn to do: define and give examples of public goods and externalities

    Image of a highway with six lanes of traffic. Seven cars and one semi-truck are traveling on the highway.
    Figure 1. Roads are an example of a public good.

    We’ve learned that free markets are socially optimal (or more specifically, allocatively efficient) because they provide the quantity of output that maximizes the social surplus. In this section, we will learn about how markets for certain products, i.e. public goods and goods with externalities, can fail to provide the socially optimal quantity of a product.

    Contributors and Attributions

    CC licensed content, Original
    • Introduction to Public Goods and Externalities. Authored by: Steven Greenlaw and Lumen Learning. License: CC BY: Attribution
    CC licensed content, Shared previously