After reading this chapter, you should be able to:

1. Explain how market failures such as externalities might justify economic functions of government
2. Distinguish between private goods and public goods and explain the nature of the free-rider problem
3. Describe political functions of government that entail its involvement in the economy
4. Analyze how Medicare affects the incentives to consume medical services
5. Explain why increases in government spending on public education have not been associated with improvements in measures of student performance
6. Discuss the central elements of the theory of public choice