Exam 22: The Economic Case for and Against Government: Five Topics Considered

Suppose health-care reform Y makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease and sets a fine for those people who do not buy insurance.  It follows that if the fine is

If government removes two people from a prisoner's dilemma setting (and, in the process, requires that the two persons pay taxes for the service that government provides), it  holds that on net

Government provides a nonexcludable public good that the public demands and can't seem to acquire through the market.  This is government

Person A argues that government is unnecessary and often does more harm than good.  Economist A disagrees.  What does economist A --- who believes that there is a legitimate case that can be made for government --- most likely say to support his position?

Why might special interest groups be more likely to push for transfers instead of economic growth?  The answer is because it usually takes a much __________________ percentage _______________ in growth to equal what they can get from the transfer.

A divisive society is a nonexcludable public _____________ because it comes with ____________.

Most economists believe that the market __________ produce nonexcludable public goods because of the __________.

Economist B thinks that it is important to identify the condition(s)under which the case for government is strongest.  With respect to the provision of nonexcludable public goods, she says

Government can overcome the free rider problem by collecting taxes and using the funds to provide individuals with nonexcludable public goods that they want to buy but the market cannot provide.

"I'm not going to pay for the good if, once produced, the good cannot be denied to anyone."  This statement is most relevant to

The government can _______________ change an inefficient market outcome (in the case where there is a negative externality)into an efficient outcome by imposing a tax on the activity that generates the negative externality.

In making the case against government, discuss the two main points about special interest groups.

Special interest group Z receives a 1\200^th slice of the economic pie.  Its net benefit from both an economic growth policy and a transfer policy is $30,000.  How much does the size of the economic pie (Real GDP)need to grow before group Z is indifferent between the two policies?

In the case of a negative externality, the government can use a ________________ to turn an inefficient outcome into an efficient one.  In the case of a positive externality, the government can use a ________________ to turn an inefficient outcome into an efficient one.

An unintended effect of a new tax placed on the producers of good A may likely include

Which economist said, "This focus on distribution makes the significance of distributional issues (transfer issues)in political life relatively greater and the significance of widespread common interest in political life relatively smaller."?

If the government grants tax credits to first-time homebuyers, the supply of houses would increase and the price of housing would fall.

A consequence of a negative externality is that social costs __________ private costs, and the efficient level of output __________.

Which of the following statements is false ?

One of the objectives of the health-care reform bills passed in March 2010 was to bring _____________ people into the pool of insured persons so that insurance policies would become ________________.  However, provisions in the bill are likely to make the average cost of an insurance policy _____________ than it would have been without reform.