Practice question · Match the pairs
Match each concept to its definition.
- Negative externality
- Coase theorem
- Free rider
- Non-rival
- Cost imposed on third parties (e.g., pollution)
- Private bargaining achieves efficiency if transaction costs are low
- One person's consumption does not diminish another's
- Benefits from a public good without paying
Hints
- Separate the spillover from the bargaining solution.
- One term names benefiting without contributing.
Show the answer
- Negative externality → Cost imposed on third parties (e.g., pollution)
- Coase theorem → Private bargaining achieves efficiency if transaction costs are low
- Free rider → Benefits from a public good without paying
- Non-rival → One person's consumption does not diminish another's
Why
Externalities, bargaining, free riding, and non-rivalry, the vocabulary of market failure.
Practise Externalities and Public Goods
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