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They would receive a benefit without paying for it ? a positive externality (Mankiw, 2007). If one person uses a common resource, other people are worse off (Mankiw, 2007). They suffer a loss but are not compensated for it ? a negative externality (Mankiw, 2007). Because of these effects, private decisions about consumption and production can lead to an inefficient allocation of resources (Mankiw, 2007). In such cases, government intervention can potentially remedy the market failure and raise economic well-being (Mankiw, 2007).
For public goods, there is a free-rider problem (McConnell and Brue, 1999)...
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