The notion that the government becomes the tool of the rent seeker and makes the allocation of resources even less efficient than before is known as ________ and is described in ________.
A. government failure; public choice theory
B. discrimination; conspiracy theory
C. collusion; conspiracy theory
D. rent-seeking; public choice theory
Answer: A
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Suppose that the consumer side of the market for good x can be modeled using a representative consumer with (initially - until part (d)) non-quasilinear preferences, and suppose the industry that produces x is perfectly competitive with identical firms. a. Illustrate a demand and supply graph with the market clearing price and quantity. b. Would a social planner who takes the distribution of income as given and seeks to maximize social surplus choose the same output quantity as the market clearing quantity in (a)?
c. Does your answer to (b) change if the social planner initially redistributes income in a lump-sum way and then maximizes social surplus? d. Next, suppose tastes are quasilinear in the good x and identical for all individuals. But there are two different types of consumers (represented in equal proportion in the population) - rich type 1 consumers and poor type 2 consumers. At their current income levels, type 2 consumers consume only the goodx (at quantity x? ) and no "other goods". For what type of lump-sum redistribution will we no longer be able to represent the consumer side as if it arose from choices by a representative consumer? e. Continuing with (d), suppose further that utility for an individual is given by the utility level associated with her consumption of xplus the dollar value of all other goods she consumes. Let type 2's utility level at her current consumption x? be given by u?. If she were to then also consume $10 worth of other goods, her utility would be (u? + 10). If a social planner could redistribute "$'s of other goods" from type 1 to type 2 in a lump-sum way, what shape would the utility possibility frontier have in the range where individuals get at least u?. f. Continuing with (e), draw the entire (first-best) utility possibility frontier (all the way to the horizontal and vertical axes) assuming that the utility possibility set has the feature you discovered in (e) and is convex. Indicate where on that utility possibility frontier we currently are in the absence of any redistribution. Which utility combination would be preferred to this by a Rawlsian social planner? Would a social planner who only cares about total utility object to the Rawlsian choice? g. Now suppose that every dollar that is redistributed entails a penny of deadweight loss. How would your answer to (f) change? What would have to be true for the Rawlsian social planner to let go of his desire for full equality? What will be an ideal response?
Which of the following would fall under the "rule of reason doctrine?"
a. General Motors colludes with Ford to fix the price of their cars b. Coke and Pepsi collude to limit the quantity of soft drinks on the market c. Intel dominates the market for computer processors with a 95% market share d. Reynolds American, Inc. and Lorillard, Inc. agree to limit the introduction of new cigarette brands e. two local restaurants agree to increase their prices by 10%
f the government imposes a price floor of $6 on this market, then there will be
A. a surplus of 20 units. B. a surplus of 30 units. C. no surplus. D. a surplus of 40 units.
Suppose that there are two employers in Tinytown. CareCo offers a generous health insurance package to all employees, while ApathyInc pays slightly higher wages than CareCo, but does not offer health insurance. All else equal, a person who is unhealthy and expects to have high healthcare costs will:
A. stop going to the doctor. B. prefer to work for ApathyInc. C. be equally happy working for either firm. D. prefer to work for CareCo.