Glossary
Chapter 5: Common Property Resources and Public Goods

No deletions this chapter

A
average revenue total revenue divided by quantity sold.

C
common property resource(s) a resource not subject to private ownership and available to all, such as a public park or the oceans.

constant returns (to scale) a proportional increase (or decrease) in one or more inputs results in the same proportional increase (or decrease) in output.

D
diminishing returns a proportional increase (or decrease) in one or more inputs results in a smaller proportional increase (or decrease) in output.

E
economic optimum a result that maximizes an economic criterion, such as efficiency or profits.

effective demand the total demand for goods and services based on ability to pay; consumers must have sufficient income to translate needs into effective demand.

F
free rider effect the incentive for people to avoid paying for a resource when the benefits they obtain from the resource are unaffected by whether they pay; results in the undersupply of public goods.

G
global commons global common property resources such as the atmosphere and the oceans.

I
individual demand schedule the relationship between price and quantity demanded for a particular individual.

L
license fee the fee paid for access to a resource, such as a fishing license.

M
marginal cost the cost of producing or consuming one more unit of something.

marginal revenue the additional revenue obtained by selling one more unit of a good or service.

market demand schedule the relationship between the price of a good or service and the quantity consumers are willing to purchase.

maximum sustainable yield (MSY) the maximum quantity of a natural resource that can be harvested annually without depleting the resource stock or population.

N
net social benefit the social gain that results when total benefits exceed total costs, including external benefits and costs.

nonexclusive good a good available to all users; one of the two characteristics of public goods.

nonrival good a good whose use by one person does not limit its use by others; one of the two characteristics of public goods.

O
open-access equilibrium the level of use of an open-access resource that results from a market with free entry; this use level may lead to resource depletion.

open-access resource(s) a resource that offers unrestricted access such as an ocean fishery or the atmosphere.

overfishing a level of fishing effort that depletes fishery stock over time.

P
psychic benefit a benefit derived without the actual use of a resource, such as the existence benefits of species preservation.

public good(s) goods available to all (nonexclusive), whose use by one person does not reduce their availability to others (nonrival).

Q
quota (system) a system of limiting resource access through user limits on the permissible resource harvest.

S
social benefit the market and nonmarket benefits associated with a good or service.

social demand the vertical addition of individual demand schedules to obtain total willingness to pay for a given level of a resource.

T
total product the total quantity of a good or service produced with a given quantity of inputs.

total revenue the total revenue obtained by selling a particular quantity of a good or service; equal to price multiplied by quantity sold.

tragedy of the commons the tendency for common property resources to be overexploited because no one has an incentive to conserve the resource, while individual financial incentives promote expanded exploitation.

U
undersupply of public goods the tendency for public goods to be supplied at levels below the social optimum because of a low effective demand.