Exam 23: Microeconomic Policy, Economic Reasoning, and Beyond

The positive contribution of politics in the determination of economic policy is that it takes market failures and failures of market outcome into account in formulating policy.

What are the three ways that economists' value judgment creeps into their analysis?

What three things must the government do in order to correct a failure of the market?

Markets can exist:

Policy makers with conservative values usually ask for policy recommendations from:

The cost of repositioning an automobile gas tank for greater safety is $11 per vehicle for 12.5 million vehicles. It is expected that 180 deaths will occur if the gas tank location is not redesigned. If a human life can be valued at $500,000, the expected benefit of redesigning the location of the gas tank is:

Define the mainstream model,the public choice model,and the Marxian model,and show how their analysis differs in the case of labor markets.

When an economy achieves economic efficiency, it:

Public choice economists point out that when the government enters into the market, the incentive is to achieve its goal in the least-cost manner.

By definition, inalienable rights:

How does the approach that most economists use to analyze regulations differ from the approach that is typically used by politicians? Explain.

The cost of repositioning an automobile gas tank for greater safety is $11 per vehicle for 12.5 million vehicles. The automobile company places a value on life of $500,000. To justify redesigning the location of the gas tank, the number of deaths expected to occur if the gas tank location is not redesigned would have to be at least:

What are Pareto-optimal policies? Can you give an example of one?

The main reason the usefulness of Pareto optimal policies is limited as a policy guide is that:

Policy makers who listen to the academic economists from whom they ask advice:

Economists' suggestions for social policy are determined by subjective value judgments as well as by objective economic analyses.

How does the "failure of a market outcome" differ from a "market failure"? Failures of market outcomes include distributional issues,rationality problems,and problems associated with inalienable rights.Discuss each of these failures.

The cost/benefit approach that economists agree on requires an economist to determine a quantitative cost and benefit for:

Which of the following programs would redistribute consumer surplus in favor of those with less surplus in an otherwise free market economy?

Does politics always make a positive contribution to economic policy? Why or why not?