Key Takeaways
Lesson Description
Key Takeaways
• Markets sometimes fail to allocate resources efficiently.
• Externalities create costs or benefits for third parties.
• Public goods are non-rival and non-excludable.
• Governments use taxes, subsidies, and regulations to correct market failures.
• Property rights encourage efficient resource allocation.
Must Know Concepts
Positive Externality
Negative Externality
Public Goods
Common Resources
Taxes
Subsidies
Must Know Vocabulary
Externality
Social Cost
Social Benefit
Marginal Social Cost
Marginal Social Benefit
Pigouvian Tax
Public Good
Free Rider
AP Exam Focus
• Identify market failures.
• Analyze externality graphs.
• Explain government intervention.