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9.5: Key Terms

  • Page ID
    215696
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    external benefits (or positive externalities)
    beneficial spillovers to a third party of parties, who did not purchase the good or service that provided the externalities
    free rider
    those who want others to pay for the public good and then plan to use the good themselves; if many people act as free riders, the public good may never be provided
    intellectual property
    the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions
    nonexcludable
    when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it
    nonrivalrous
    even when one person uses the good, others can also use it
    positive externalities
    beneficial spillovers to a third party or parties
    private benefits
    the benefits a person who consumes a good or service receives, or a new product's benefits or process that a company invents that the company captures
    private rates of return
    when the estimated rates of return go primarily to an individual; for example, earning interest on a savings account
    public good
    good that is nonexcludable and non-rival, and thus is difficult for market producers to sell to individual consumers
    social benefits
    the sum of private benefits and external benefits
    social rate of return
    when the estimated rates of return go primarily to society; for example, providing free education

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