Problem 1: From time to time, the city of Chicago provides free concerts. Can this program be rationalized on the basis of welfare economics? Relate the program to the concept of merit goods.
Problem 2: Some say, "Small corporations should face lower tax rates than large businesses, just as individuals with low incomes should face lower income tax rates than those with high incomes." What view of the corporation is implicit in this statement? Contrast this view with the view of conventional economics.
Problem 3: In his State of the Union address in 2002, President Bush said, "To achieve these great national objectives-to win the war, protect the homeland, and revitalize our economy-our budget will run a deficit that will be small and short-term." Under what conditions, if any, is it sensible to use a deficit to finance a war?