Which of the following could be an unintended consequence (or a reaction from the private sector) of the government providing more and more of a particular public good, when the private sector was already providing some? crowd out of private provision O contracting out O free riding O private sector starts providing more
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- What is a market-failure rationale for the government investing in transportation and infrastructure, for example roads, highways, bridges and tunnels? a. Government policy acts to correct for the under-provision of private goods by the private, unregulated market. b. Government policy acts to correct for the over-provision of private goods by the private, unregulated market. c. Government policy acts to correct for the over-provision of public goods by the private, unregulated market. d. Government policy acts to correct for the under-provision of public goods by the private, unregulated market.Discuss how governments decide the optimal level public good provision and then consider the impact of taxation due to such provision. Use examples to substantiate your points.This problem is set in a fanciful location but it This problem is set in a fanciful location, but it deals with a very practical issue that concerns residents of this earth. The question is, “In a Democracy, when can we expect that a majority of citizens will favor having the government supply pure private goods publicly?” This problem also deals with the efficiency issues raised by public provision of private goods. We leave it to you to see whether you can think of important examples of publicly supplied private goods in modern Western economies. On the planet Jumpo there are two goods, aerobics lessons and bread. The citizens all have Cobb-Douglas utility functions of the form Ui(Ai,Bi) = A1/2i B1/2i, where Ai and Bi are i’s consumptions of aerobics lessons and bread. Although tastes are all the same, there are two different income groups, the rich and the poor. Each rich creature on Jumpo has an income of 100 fondas and every poor creature has an…
- Assuming the government pays higher cost of production by paying wages that are higher than the private sector rates, analyse the effect of the change in the costs of producing public good caused by government inefficiency?Which one of the following is a definition of a merit good? A) Services which can only be provided by the government through taxesB) Goods which provide cear social and private benefits to consumersC) A good which can be produced by the market but would likely be under-consumedD) Goods which are beneficial in consumption but consumers are unaware of the extent of the benefitsE) Goods which are not capable of being provided by the market because they are excludable and rival Merit goods are an example of which of the following problems in economics:A) Free riderB) Principal-agentC) Tragedy of the CommonsD) Intertemporal choiceE) Excludable, non-rival goods provision De-merit goods have characteristics that if left the market mechanism, they are over consumed and impose private costs on the individual consume them, and also have wider social costs. Which of the following ways in which a government might seek to reduce consumption of of merit costs? Check all the apply A) Impose…Suppose the government provides some amount of a public good, but it results in a reduction of private market’s production of the good by the same amount as the government produced. In this case, A private provision is not crowded out. B private provision is partially crowded out. C the warm glow effect caused an increase in the net amount of the public good. D private provision is fully crowded out.
- Explain the term public goods with examples. Some dissenting scientists at Environment Canada disagree with the estimate of $1.50 for theenvironmental externality. They believe that the incidence of the externality is not constant acrossdifferent levels of production; instead the size of the externality is proportional to the level of output.That is, the larger is the output, the larger is the externality. Their research suggests that the truesocial cost of cereal production diverges from private costs at every level of production by an amountequal to ten percent of production (note: ten percent, not ten percentage points).The government would like to know the economic effects of implementing a tax to internalise theexternality in this case. Draw the diagram for this market and policy. Solve for all relevant Ps and Qs.Calculate producer surplusThe main problem with public goods is that: a. They lead to depletion of resources such as stock of fish. b. Typically, the private sector alone finds no incentive to provide them. c. If provided, they generate economic inefficiency. d. Exist in theory, but not in the real world.
- What is a market-failure rationale for the government investing in education and training programs? a. Education likelyresults in a negative externality in production, so government investment corrects for the under-provision by private, unregulated markets. b. Education likely results in a positive externality in consumption, so government investment corrects for the under-provision by private, unregulated markets. c. Education likely results in a positive externality in production, so government investment corrects for the over-provision by private, unregulated markets. d. Education likely results in a negative externality in consumption, so government investment corrects for the over-provision by private, unregulated markets.Define and give an example of a public good. Can the private market provide this good on its own? Explain.Suppose a new social service is introduced by a government at a fixed cost of $3,000 (note: there is no marginal cost to provide this service). This service has not been provided before and there is no available substitute for this service. Economists have estimated the marginal benefit of the new service is given by: MB = 100 – Q where Q is the quantity (in hours) of the service that is used. Please note the MB gives both the marginal private benefit (MPB) and marginal social benefit (MSB) (i.e., MB = MPB = MSB). To ensure those that need the service the most are the ones that receive it, the government sets up an administrative mechanism to ration the 50 hours of service (e.g. people have to meet certain criteria that have to be checked). The cost to the government of setting up this mechanism is $500. Is it a good investment for the government to provide the service with this rationing mechanism in place? What is the net social benefit that is created? Explain your reasoning and…