Public finance aims to achieve an efficient allocation of resources within an economy, considering both private and public goods.

Public choice theory assumes that individuals act in their own self-interest when making economic and political decisions.

Free riding occurs when individuals consume a public good without paying for it, leading to an underprovision of the good.

Public goods can be financed through a combination of user fees, taxes, and government borrowing.

A public good is characterized by non-rivalry and non-excludability, and it is typically underprovided by the market due to the free-rider problem.

Income tax, sales tax, and property tax are all common types of taxes used to generate revenue for government spending.

A public bad is characterized by negative externalities and is typically overprovided by the market.

The median voter theorem assumes that voters have single-peaked preferences, are rational and self-interested, and have equal political power.

Government failure occurs when the government intervenes in the market and creates an inefficient outcome.

Rent-seeking, bureaucracy, and corruption are all common types of government failure that can lead to inefficient outcomes.

Market failure occurs when the market fails to allocate resources efficiently, leading to an underprovision or overprovision of goods and services.

Externalities, public goods, and natural monopolies are all common types of market failure that can lead to inefficient outcomes.

Government intervention occurs when the government takes action to correct a market failure, such as by providing a public good or regulating a natural monopoly.

Regulation, subsidies, and taxes are all common types of government intervention that can be used to correct market failures.

A public good is a good or service that is non-rival and non-excludable, and it is typically provided by the government because the private sector would not provide it efficiently.