Chapter 5: Q 1 (page 118)
How does the jump in measles cases since 2000 illustrate the positive externality associated with measles vaccinations? Explain briefly.
The measles vaccination reduced the spread of the disease.
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How does a city's decision to assess substantial fines on rail operators that persistently generate traffic congestion affect the supply curve for rail services within the city?
Analyze how public spending programs such as Medicare and spending on public education affect consumption incentives.
After a government implements a voucher program, granting funds that families can spend at schools of their choice, numerous students in public schools switch to private schools. Parents’ and students’ valuations of the services provided at both private and public schools adjust to equality with
the true market price of educational services. Is anyone likely to lose out nonetheless? If so, who?
Many economists suggest that our nation's legal system is an example of a public good. Does the legal system satisfy the key properties of public good? Explain your reasoning.
Suppose that the U.S. government determines that cigarette smoking creates social costs not reflected in the current market price and equilibrium quantity of cigarettes. A study has recommended that the government can correct the externality effect of cigarette consumption by paying farmers not to plant tobacco used to manufacture cigarettes. It also recommends raising the funds to make these payments by increasing taxes on cigarettes. Assuming that the government is correct that cigarette smoking creates external costs, evaluate whether the study’s recommended policies might help correct this negative externality.
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