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List some of the questions you might ask to ascertain whether the increased expenditures are desirable.
In what ways is the purchase of a hammer or of labor services by the military different from the purchase of an MX missile system?
Why does such a system encourage bidders to bid honestly their true costs of production?
In some cases, the government runs duplicative projects, particularly at early stages of development. What do you think is the advantage of doing this? The disa
Under what conditions might the risk premium be large? What are other possible pitfalls in this system?
What negative effects might this change have on the rate of innovation? What positive effect might it have for the economy?
Suppose that many years ago, one inventor received a patent for orange juice. What trade-offs does society face in setting rules for deciding cases like these?
Why might a company invest in research and development even if it does not believe it will be able to patent its discovery?
Why might knowledge be thought of as a global public good? What implications does this have for government policy in a small country?
We have noted that there is extensive disagreement on what should be done about the way medical care is provided in the United States.
Doctors often charge patients different amounts depending on their judgment concerning their ability. What implications does this have for exchange efficiency?
Describe some of the tricks you might use to reduce the apparent budget deficit while maintaining current levels of services and transfers (subsidies).
Explain how the same results could be obtained by converting the tax expenditure into a conventional expenditure.
What adjustments might you make in looking at education expenditures? At social security expenditures?
To what extent are the disagreements attributable to differences in views of the economy?
Identify the sources of disagreement: Are they due to differences in values and objectives? To differences in perceptions about the nature of the economy?
Explain why an economy in which airlines charge different passengers different prices for the same flight will not have exchange efficiency.
To what extent do you think differences in views between advocates of less spending on public goods and advocates. What are other sources of disagreement?
Under what circumstances would a utilitarian give nothing to an individual who had experienced an accident?
What is the social welfare associated with each allocation of oranges? What allocation maximizes social welfare?
What allocation maximizes social welfare? Show that it has the property that the marginal utility of an extra orange given to each individual is the same.
Explain why a tax which is only levied on the use of capital by corpora. dons will interfere with the production efficiency of the economy.
Advocates of small businesses often argue that they should receive special tax treatment. What effect would that have on production efficiency?
Explain why if a tax is imposed on the consumption of can but not on shirts, the economy will not exhibit product mix efficiency.
If the primary objective of government programs in each of these areas is the alleviation of some market failure, how might they be better designed?