ECON 313 UNR Economics Of Public Policy Homework Help

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Final Exam ECON 411X Answer the following questions 1. Define economic efficiency. 2. Discuss the market failure associated with the production of information. State the market failure and provide a clear definition. In your answer discuss the economic argument for government subsidization of basic research. 3. Compare and contrast the effects on economic efficiency of a Pigovian tax on pollution with the efficiency effects of a payroll tax on wages. Include separate diagrams that illustrate the effects of these two policies. Include a clear discussion that explains the diagrams and the effects of the taxes on economic welfare for each case. 4. Autor notes that “ATMs were introduced in the 1970s, and their numbers in the US economy quadrupled from approximately 100,000 to 400,000 between 1995 and 2010. One might naturally assume that these machines had all but eliminated bank tellers in that interval. But US bank teller employment actually rose modestly from 500,000 to approximately 550,000 over the 30-year period from 1980 to 2010 (Autor, 2015, p. 6).”1 Provide an economic explanation for this seemingly contradictory result. 6. Consider the case where insured consumers pay only a fraction,  , of the price of health care. 7. 1 a. Define moral hazard in this setting. b. In which case is the moral hazard associated with insurance more severe, when the treatment’s demand is relative price elastic, or price inelastic? Include an illustration. Provide a clear and concise explanation of your illustration. Cost-Benefit Analysis (CBA). a. Provide a brief description of a cost-benefit analysis. b. Describe two of the benefits associated with increasing high-school graduation rates discussed in the assigned reading. c. What role does the social discount rate play in a Cost-Benefit Analysis? Does the importance of the rate used differ in CBA that analyzes the building of a new road compared to a CBA that examines the benefits and costs associated with reducing greenhouse gases? Explain. David H. Autor (2015). “Why Are There Still So Many Jobs? The History and Future of Workplace Automation.” Journal of Economic Perspectives. Vol 29 (3) pp. 3-30. 8. Illustrate and explain the effect a negative externality has on market outcomes. Show the output and price given by the market. Compare the market outcome with the efficient outcome. Identify and explain the deadweight loss. 9. Discuss adverse selection and moral hazard in the context of health insurance. What effect does the requirement that insurance companies cannot deny coverage to people with pre-existing conditions have on the price of health insurance? Explain. 10. Discuss the differences between public goods, publicly provided goods and merit goods. In your answer, define a public good. 11. Discuss the trade-off between efficiency and equity that arises when policy makers pursue policies that redistribute income. In your answer define deadweight loss and Pareto Efficiency. 12. Discuss the trade-off between efficiency and equity that arises when policy makers pursue policies that redistribute income. In your answer define deadweight loss and Pareto Efficiency. 13. Consider the proposed AT&T and T-Mobile merger. a. Discuss the effect the proposed merger would have had on market concentration (as measured by the HHI). What effect would you expect this change in concentration to have on prices in the market? Explain. b. Discuss the barriers to entry in this market. If the combination of AT&T and TMobile led to higher prices, what effect would entry and exit have on profits in this industry? Explain. 14. Is education a public good? Define public good as part of your answer. Explain. 15. Explain how organized interests use the political process to compete for benefits. Are large or small groups more likely to secure rents through the political process? Provide the reasoning underlying your answer. Define rent-seeking behavior in your answer. 16. Medical vs. Economic Waste (Inefficiency) 17. a. What is the definition of wasteful spending according to the medical profession? b. What is the economic definition of waste? c. Relate the idea of opportunity cost, if possible, to these two definitions of waste. Consider two bonds that pay $1 when the issuer does not default, and $0 otherwise. Assume that the probabilities of default for the bonds are not correlated. Each bond has a 1% (0.01) probability of defaulting. A financial company uses these two bonds to construct a collateralized debt obligation (CDO) that consists of a senior and junior tranche. a. What is the probability that the senior tranche will default? Explain. b. What is the probability that the junior tranche will default? Explain. c. Discuss the difficulties associated with rating a CDO compared to a standard bond offering. 18. 19. Consider the following diagram for medical services where consumers pay only a fraction,  , of price, P. Assume that P equals the marginal cost of service. a. Recreate this diagram and show how only paying a fraction of costs leads to an over-consumption of health care, increases health-care costs, and results in a deadweight loss. Define deadweight loss in your answer. b. How does the price elasticity of demand for health-care services affect the amount of deadweight loss associated with insurance plans that reduce the out-of-pocket prices paid by consumers? Explain and illustrate. c. Explain why only a competitive and well-behaved market can guarantee an efficient outcome. In your answer discuss three factors that undermine a market’s ability to guarantee an efficient outcome. (15 points) Explain why the social discount rate used in a benefit-cost analysis can have a large impact on the study’s conclusions. Begin by defining the social discount rate. To answer the question discuss how the social discount rate used in a study affects the results of a benefit-cost analysis on the use of carbon taxes to address problems associated with climate change.
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