Questions
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1) Suppose astronomers look into their telescopes and see an earth-killing comet coming. They predict it will strike earth in ten years but they have no sure way to deal with it. Use the concepts of this chapter to explain why government would have a role in dealing with this problem, why the market would fail, its options for solving the problem, paying for the problem, and procuring the solution to the problem.
2) Suppose you have three people who are suggesting three social welfare functions for a society of five persons. Person 1 suggests the sum of the utility of each individual (U1+U2+U3+U4+U5). Person 2 suggests using the minimum utility of each individual (the lowest of U1 through U5). Person 3 suggests multiplying the individual utilities together (U1xU2xU3xU4xU5). Now for ease of explanation, imagine society has 10 units of stuff to distribute and that each persons' happiness is the square root of the number of things they have. Which person (1, 2 or 3), do you imagine, is the Democrat and which is the Republican, and which is the moderate and why? What can you tell about their SWFs that causes you to think that?
3) There are two completing theories on breast cancer detection via mammography. The first suggests testing everyone starting at age 40 will spot the most cancers early and therefore lead to greater cure rates. The second argues that the false positive rate on mammography and the number of retests on women under 50 results in more cancers being CAUSED by excessive mammography. (Mammography is an X-Ray of the breast and as a result uses radiation. More radiation leads to more cancer.) Both are theoretically plausible. Explain how a randomized control trial would work to settle this issue. Explain why you could not ask for volunteers for each group.
4) Describe the competing views on whether and how the budget deficit impacts economic growth.
5) Describe why a regulatory solution is less desirable than a tax/subsidy solution when there are polluters with different costs associated with pollution reduction.
6) Describe why public provision of public goods can crowd out private spending on public goods and cite the evidence regarding the degree to which this is the case.