Comparative Advantage Of Public Goods

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Public goods A public good is a good that individuals can use without reducing its availability to others and that is openly available to everyone. An example are the dikes in the Netherlands. Once a dike has been created, no one can be excluded from enjoying its benefits as it protects everyone and no one can reduce its availability to others. Market failure Is when the allocation of goods and services is suboptimal which means that the quantity provided does not meet the quantity that is in demand. This happens because individuals make decisions that are rational and good for themselves, however not good for the group as a whole. Some public goods can create market failure if some customers decide not to pay but still use the good. National…show more content…
They should therefore focus on producing bicycles over other goods. Liquidity The ease of which an asset can be used at a known price in making payments. In other words, liquidity is what assets you can use right now without having to wait for it to free up. Cash is the best example of a liquidity. How much cash you have on you is how liquid you are in that particular moment if you should lose all of your electronic payment options. Cash is therefore completely liquid. Hegemonic stability theory Hegemonic stability theory is a theory of IR which stipulates that the international system is more likely to be stabile if one state is the dominant world power, or hegemon. Right now, the hegemon is the US, before that it was Great Britain. Without these hegemons, the theory argues that there would be instability due to competing powers and divides. Tragedy of the commons Occurs when individuals neglect the well-being of society in the pursuit of personal gain. These individuals act according to their own self-interest and behave contrary to the common good by depleting or spoiling a resource. The demand for the resource then overwhelms the supply which harms others who can no longer enjoy the…show more content…
Prisoner’s Dilemma A situation where two payers have two options whose outcome depends on the simultaneous choice made by the other. Often formulated in terms of two prisoners separately deciding whether to confess to a crime. Drug cartels have a constant prisoner’s dilemma. Cooperating means keeping prices at an agreed minimum level, deflecting means selling the drugs for under the minimum level. If both decide to deflect, both lose money. If one deflects, that one earns more, while if both cooperate they keep an equilibrium. Regulatory Capture Is a form of government failure which happens when a regulatory agency, formed to act in the publics interests, acts in a way that benefits the regulated industry rather than the public. Government agencies suffering regulatory capture are often called captured agencies. The Troika, consisting of the European Central Bank, European Commission and the IMF bailing out Greece could be seen as regulatory capture as it could be argued that this was beneficial for the the banking sector, which is regulated by the European Central Bank, rather than for the public

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