Describe some of the trade-offs faced by each of thefollowing: a. a family decid

Question

Describe some of the trade-offs faced by each of thefollowing:

a.       a family deciding whetherto buy a new car

b.      a member of Congress decidinghow much to spend on national parks

c.       a company presidentdeciding whether to open a new factory

d.      a professor deciding how muchto prepare for class

e.      a recent college graduatedeciding whether to go graduate school

Explain whether each of the following government activities ismotivated by a concern about equality or a concern aboutefficiency. In the case of efficiency, discuss the type of marketfailure involved.

a.       Regulating cable TVprices

b.      Providing some poor people withvouchers that can be used to buy food

c.       Prohibiting smoking inpublic places

d.      Breaking up Standard Oil (whichonce owned 90% of all oil refineries) into several smallercompanies

Explanation / Answer

A. The tradeoff of buying a car for the family is anythingelse they could get for the money they spend to buy the car B. The tradeoff for the member of congress deciding how muchto spend on the park is the money he could be spending on otherprograms C. The tradeoff for the president deciding whether or not toopen a new factory is the funds he could use to improve technologyor to raise wages of employees D. The tradeoff for the professor is the time he could spendresting instead of preparing for the class E. The tradeoff for the college student is the time he couldspend at a job or going to college for an opportunity for a betterjob
A. Equality so that people are able to afford cableprices B. Equality so that people without jobs are able toeat C. Efficiency the government is trying to lower the effects ofan externality that is second hand smoke D. Efficiency the government attempts to break up market powerof Standard oil which is a market failure
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