( 7 ) What are ” public goods ” ? Define the characteristics , using examples . As we discussed in class , the existence of externalities creates an efficiency problem in the provision of these goods and services Unlike the private sector , State and Local Governments are able to intervene . Using the example of public goods you have provided , please provide an example of an externality that will impact it’s provision , and detail how a government could intervene ( 9 ) To determine what / how a community determines levels of public goods , we discussed the application of three theories ( or principles ) and how they interact with each other . Explain these three , and using the concepts that we employed in our in class exercise , provide a rationale for why the system we have works in defining what individuals are willing to pay for certain public goods What are some of the inherent flaws with this system ?