Exam 37: The Economic Case For and Against Government: Five Topics Considered

Suppose that for Alicia the marginal benefit (MB)of producing is $75 and that the marginal cost (MC)of producing is $5. Suppose also that her marginal benefit of stealing is $85 and the marginal cost of stealing is $5. Is Alicia currently maximizing utility in terms of producing and stealing? If not,should she produce more and steal less,or produce less and steal more to move toward utility maximization?

Why might special interest groups be more likely to push for transfers instead of economic growth? The answer is because it usually takes a much __________________ percentage _______________ in growth to equal what they can get from the transfer.

Involuntary transfers are the type of transfers used in the case against government.

Government provides a nonexcludable public good that the public demands and can't seem to acquire through the market. This is government

Special interest group A receives a 1/10,000?? slice of the economic pie (Real GDP). It is seeking a transfer of $1,000. For group A to be indifferent between a transfer policy and an economic growth policy,economic growth must be ________________ times larger than the _________________.

Government always makes individuals better off when it removes them from a prisoner's dilemma setting.

An unintended effect of a new tax placed on the producers of good A may include

Which of the following is false?

The government can _______________ change an inefficient market outcome (in the case where there is a negative externality)into an efficient outcome by imposing a tax on the activity that generates the negative externality.

The answer is,"Because of the free rider problem." The question is:

Which of the following is false?

Special interest groups are very unlikely to push for policies that increase the size of their slice of the economic pie if it means that the overall size of the economic pie will shrink.

A positive externality exists and government wants to impose a subsidy in order to bring about an efficient outcome.To accomplish its objective,government must set the subsidy equal to marginal

In the case of a positive externality,in order to achieve efficiency the government must set the _________________ equal to the marginal ____________________.

In the case of nonexcludable goods,economists contend that the market ___________ produce these goods because of the ________________________.

In the case of externalities,government can use taxes and subsidies to turn an inefficient outcome into an efficient outcome.

One of the objectives of the health-care reform bills passed in March 2010 was to bring _____________ people into the pool of insured persons so that insurance policies would become ________________. However,provisions in the bill are likely to make the average cost of an insurance policy _____________ than it would have been without reform.

A special interest group has a good chance of redistributing (transferring)income from others to itself if the

List and describe the three different types of transfers discussed in this chapter. Give a hypothetical example of each to help support your answer.

Given that the demand for unskilled labor curve is downward-sloping,an unintended effect of raising the minimum wage is that some people who worked at the lower wage will lose their jobs at the higher wage.