Midterm

Suppose that gunk has marginal benefits of reduction equal to 20 − 2x and marginal costs of reduction equal to 5 + x − 2, where x is the tons of gunk reduced. Graph the MB and MC curves to find the efficient level of gunk reduction.As a result of imperfect information, regulators are considering two inefficient policies: a tax 10 percent below the efficient tax level and a marketable permit system with the number of permits to be issued 10 percent below the efficient reduction level. Use your graph to show the monetary loss to society as a whole of the different policies. Which is more efficient?Suppose that regulators did not know exactly where the MB curve lay, but did know that gunk was a threshold pollutant. Should they use a tax or permit system if they are interested in efficient regulation? Why?

Adam Smith proposed taxing ‘Sugar, rum and tobacco’ because they are: “nowhere necessaries of life” “objects of almost universal consumption” In consumer theory economics, what is the difference between a necessity and a luxury good. What is the likely difference in the tax revenue obtained from a tax imposed on a necessity versus a luxury good? Explain and illustrate with appropriate figures. Question Requirements: Identify the difference between a necessity and luxury and provide an example. Highlight ability to identify the link of this definition to tax revenue. Highlight ability to encapsulate this concept precisely using correctly drawn figure.

How does politics impact the issue of cost benefit analysis from a regulatory perspective? How does this issue impact the ability of a government intervention to achieve parato efficiency? Explain fully with examples? Does it matter if we are talking about a democracy versus a non-democratic government with differing market institutions? Explain.

On Hayek's spectrum of economic planning places monopolies somewhere between central planning and capitalism. True or False

True or False:   The licensing and regulation of financial advisers is one way by which the government tries to deal with the problem of inadequate information that financial firms have about their customers.

share your thought about the future of regulatory and market driven approaches to contain costs and current trends.

Name and explain in detail two mechanisms through which the market for corporate control operates.

1. When an auto insurance company is​ screening, it is   A. attempting to keep its private information private.   B. marketing its policies to customers.   C. ignoring the possibility of moral hazard in order to minimize adverse selection.   D. trying to determine if a driver is an aggressive driver or a safe driver.   E. making its private information public.   2. In the market for health care​ services, Health Maintenance Organizations A. help overcome adverse selection by enrolling only healthy clients. B. exist to insure people with preexisting medical conditions. C. overprovide medical care and thereby result in increased costs. D. help overcome moral hazard by monitoring the quality of the service.   E. None of the above answers are correct   3. Moral hazard in the market for healthcare services leads Question content area bottom Part 1 A. to providers over treating patients.. B. to healthy people not buying health insurance. C. patients to adopt healthy life styles. D. to all…

The concept of market efficiency applies only in the financial market.  True or False?

Suppose a political candidate criticizes a government pollution permit policy that she says lets corporations buy and sell the right to pollute. She argues that our right to breathe and the future of our planet require real regulation instead of this type of government policy.   Which of the following describes why most economists would disagree with her statement?   1. A corrective tax would result in a more efficient outcome than either tradable permits or government regulation would.   2.A free market in tradable pollution permits is typically more efficient than government regulation.   3.Clean air is a fundamental right, and government regulation will allow too much pollution.   4.The environment is so important that it should be protected as much as possible, regardless of the cost.

Suppose when he took office in January 2009, President Obama wanted to reduce the level of spending by the DEA during fiscal year 2009. What budget procedure would have allowed him to do that? A. He could have requested executive transfers out of the Drug Enforcement Administration to the Department of Treasury impoundment fund. B. Congress could have approved a recession. C. He could have requested a financial audit of the DEA. D. He could have created a new governing policy or federal law.

(1) the goverment wants to to regulate helth insurance companies requairing them to provide insurance coverage not just for future health problems , but also for pre-exiting conditions. such a policyto succeed , it is important to make purchase of helth insurance compulsory for individual . it this true or false?explain your answer

Which are the two key ’problems’ encountered in aggregating on the consumer side, and why it not occurs on the producer side ? Pls short answer in 15-20 Sentences

2. The purpose of an ordeal mechanisms is to separate those who truly need assistance fromthose who can support themselves. True, False, or Uncertain? Support your answer with anexplanation (one to two sentences) or a diagram.

Questions: 1A) If MU Café, which is a monopolistically competitive firm, is making a positive profit in the short run, why might this profit become zero in the long run? 1B) If MU Café wants to keep the profit positive in the long run, what can it do? Provide ONE suggestion and briefly explain. 1C) What externality problem do you expect in the market for plastic bags? How does the government correct the inefficiency of the market? Explain in detail and diagram.

Why should regulatory regimes be ‘proportionate’ and ‘real-time’? What are the fundamentalbuilding block? (50 words)

Which of the below listed statements DOES NOT reflect what Charles Wheelan has written in chapter 8, "Power of Organized Interests," in the book, Naked Economics?  A) Politicians and their support can be influence as much by active political lobbying, as by financial support.   B) The author believes that only unscrupulous politicians support funding for specific projects known as funding "earmarks."   C) "Earmarks"which direct federal money to a specific project in a member's district (such as the "bridge to nowhere" in Alaska) are appended on to major bills (such as the transportation bill). When the broader (transportation) bill passes the "pork" expense item will also get through without a formal Congressional review. By itself such a spending item would not have received Congressional approval.   D) Politicians get influenced by active special interest groups since the politicians need votes and money to remain in power.

Confucius is a "laissez-faire" thinker--this implies an absolute--that government must never regulate any element of business.   1)True   2)False

1) A key difficulty facing insurance companies is that people know more about their health than do insurance companies, and that those people who are seriously ill are the most likely to want to obtain health insurance. What is this phenomenon called? A) moral hazard B) economic irrationality C) asymmetric information D) adverse selection 2)  An insurance company is likely to attract customers like Clancy who want to purchase insurance because he knows better that the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above? A) moral hazard B) adverse selection C) asymmetric information D) economic irrationality 3) The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is A) inefficient market hypothesis. B) moral hazard. C) information disparity. D) asymmetric information. 4) Which of the following parties is…

1. Suppose the government is considering a ban on smoking in restaurants in Tobaccoville. There are 1 million residents in Tobaccoville, and each resident would benefit by $200 from the smoking ban. However, there are two large tobacco companies in Tobaccoville, and the ban would cost each company $5 million. What are the proposed policy's total costs and total benefits? Why would the proposed smoking ban likely fail?   2. To ensure safety and efficacy, the Food and Drug Administration regulates the medicines that pharmacies are allowed to sell in the US. Sometimes this means that a company must test a drug for years before receiving FDA approval and reaching the market. We can easily identify the "winners" in this system as those who are protected from unsafe drugs that might otherwise harm them. Who are the more "anonymous losers" who suffer due to the strict FDA medical regulations?