Q=100-P Costs $6 to purchase a pack of cigarettes each pack smoked does $6 worth of health damage and $5 worth of secondhand health damage All consumers are aware of these costs 1. Assume that the Coase Theorem actually does apply in this setting. The government passes law the gives anyone the right to forbid his neighbor from smoking. WHo benefits and who is harmed by the law and how will this affect the level of smoking?

Q=100-P Costs $6 to purchase a pack of cigarettes each pack smoked does $6 worth of health damage and $5 worth of secondhand health damage All consumers are aware of these costs 1. Assume that the Coase Theorem actually does apply in this setting. The government passes law the gives anyone the right to forbid his neighbor from smoking. WHo benefits and who is harmed by the law and how will this affect the level of smoking?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 3P

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Q=100-P Costs $6 to purchase a pack of cigarettes each pack smoked does $6 worth of health damage and $5 worth of secondhand health damage All consumers are aware of these costs 1. Due to an introduction of a hyper-effective tobacco fertilizer, the cost of producing a pack of cigaretts decreases to $1. How does this affect the level of smoking and the level of social loss? 2. suppose the government decides to pursue a Pigovian solution to eliminte social loss. What sort of of tax or subsidy would they implement and what is the resulting quantity of cigarette packs purchased? 3. In the case of the Coase Theorem, it is said that the socially efficient level of smokeing will occur without government intervention. how are property rights established and why might the Coase Theorem not apply in this setting?
Indicate whether the statement is true or false, and justify your answer.The Coase theorem says that well-defined property rights and low transaction costs are needed in order for the social optimum to be guaranteed through bargaining.
Consider the case of: Buying a car with added safety features that prevent the drivers and passengers’ deaths in the event of an accident (a) Does an externality exist? If so, is it positive/negative (or both) (b) Use Coase’s framework to identify the cause of the externality (c) If an externality exists, determine whether the Coase theorem applies (i.e. is it feasible to assign property rights and solve the problem?)
In order to suppress the spread of a viral disease, the government has resorted to nonpharmaceutical interventions (NPIs) that restrict the mobility of individuals such as quarantine and lockdown. Provide an economic framework, based on private and social benefits and costs that could guide the government in selecting the appropriate form and level of NPI. In the absence of a highly contagious disease, an individual engaging in activity x does not externalize any cost to others. In the presence of the disease, then an infected individual can transmit the disease to others during the performance of his or her activities. a. Discuss the nature of the externality, if there is any.
Consider the case of: Buying a car with added safety features that prevent the drivers and passengers’ deaths in the event of an accident (a) Does an externality exist? If so, is it positive/negative (or both) (b) Use Coase’s framework to identify the cause of the externality (c) If an externality exists, determine whether the Coase theorem applies (i.e. is it feasible to assign property rights and solve the problem?) (d) If an externality exists and the Coase theorem does not apply, discuss a government/institutional solution that can mitigate the problem of externality
If an excise tax on cigarettes offsets the negative externalities associated with smoking, it means that: a. The Pareto efficient level of smoking will decline. b. The private marginal benefit of smoking will rise. c. The privately efficient level of smoking will equal the Pareto efficient level. d. The private marginal cost of smoking will decline. 9.In the Principal-Agency relationship in health care markets, the _______ acts as the agent for the ________, the principal. a. Government; insurer. b. Insurer; government. c. Health care provider; patient. d. Patient; health care provider. In the presence of external benefits for a health care service, the private market will generally provide: a. The economically efficient level of output. b. Less than the Pareto efficient level of output. c. More than the Pareto efficient level of output. d. The answer depends on the nature of the benefits
Consider a used car market with asymmetric information. The owners of used cars know what their vehicles are worth but have no way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they are being offered may be a low quality “lemon.” a. Suppose that there are equal numbers of good and bad used cars in the market and that good used cars are worth $13,000 while bad used cars are worth $5,000. What is the average value of a used car? b. By how much does the average value exceed the value of a bad used car? By how much does the value of a good used car exceed the average value? c. Would a potential seller of a good used car be willing to accept the average value as payment for her vehicle? d. If a buyer negotiates with a seller to purchase the seller’s used car for a price equal to the average value, is the car more likely to be good or bad? e. Will the used-car market come to feature mostly—if not exclusively—lemons? How…
Situation 37-2Dan and Ann live in the same community and both can participate in two activities, producing and stealing. Refer to Situation 37-2. Ann spends 8 hours of each day producing and 1 hour of each day stealing. It is probably the case for her that a. There is not enough information to answer the question. b. her MB/MC ratio for producing never changed, no matter how much or how little she produced. c. her MB/MC ratio for stealing never changed, no matter how much or how little she stole. d. at some point the MB/MC ratio for producing fell below the MB/MC ratio for stealing. e. her MB/MC ratio for producing was always greater than her MB/MC ratio for stealing.
Discuss carefully how welfare changes when the ULEZ policy is introduced. Is the social welfare higher under the ULEZ policy than without it? Which group benefits from the policy and which group is harmed by it? How does the cost of pollution C(x1, x2) change when the policy is introduced? What is the intuition behind these changes? [Suggested word count: 100 words]
One problem with insurance is that buyers who have more chance of needing a payout (like being in worse health or having worse driving habits) are the ones who are more likely to buy insurance at a price that a private company would offer it. This is referred to as... adverse selection. the tragedy of the commons a negative externality moral hazard.
"If the production of health care generated positive externalities, the welfare costs of moral hazard would be smaller than suggested by M. Pauly's analysis." Is this statement true, or false? Use a graph to illustrate your answer.
As most countries are dealing with the second wave of coronavirus,policy makers are faced with a trade-off between maximizing social distancing measures to suppress the disease & the need to maintain some sense of normal economic activity.Some pundits claim this to be a classic example of equity-efficiency trade-off in economic policies.As an expert in Economic Analysis & policy what do you think?