Externalities and Public Goods are two ways in which markets fail to reach an optimal outcome.

As a result of watching this programme you should be able to:
- Know the meaning of the following terms: private cost, social cost, externality, public goods, non-excludable goods, non-rival goods.
- Understand why markets can fail to use resources optimally in the presence of externalities.
- Be aware of the problems for markets created by public goods.
- Understand the free rider problem.
- Appreciate the limits to which governments can overcome the problems associated with externalities and public goods

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