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Chapter 5: Q. a (page 102)
Could negative externalities from drone flights be addressed if it were
possible for people to negotiate prices at which drone owners would pay
explicit fees for the right to fly drones above people's properties?Explain
your reasoning
Yes.
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Distinguish between private goods and public goods and explain the nature of the free-rider problem.
Discuss the central elements of theory of public choice
Consider the market for a health care service displayed in Figure, in which the government currently pays a per-unit subsidy M.If the government raises the value of M to a larger dollar amount per unit of service, what will happen to the out-of-pocket price paid by consumers, the price required to induce suppliers to provide services, and the number of services provided? Will the government's total expense for this health care service rise or fall?
Suppose that, as part of an expansion of its State Care health system, a state government decides to offer a \(50 subsidy to all people who, according to their physicians, should have their own blood pressure monitoring devices. Prior to this governmental decision, the market-clearing price of blood pressure monitors in this state was \)50, and the equilibrium quantity purchased was 20,000 per year.
(a) After the government expands its State Care plan, people in this state desire to purchase 40,000 devices each year. Manufacturers of blood pressure monitors are willing to provide 40,000 devices at a price of $60 per device. What out-of-pocket price does each consumer pay for a blood pressure monitor?
(b) What is the dollar amount of the increase in total expenditures on blood pressure monitors in this state following the expansion of the State Care program?
(c) Following the expansion of the State Care program, what percentage of total expenditures on blood pressure monitors are paid by the government? What percentage of total expenditures is paid by consumers of these devices?
Based on your answer to Question 5-17, if Pennsylvania's government aims to correct the steel market's negative externality via an effluent fee, is the appropriate fee higher or lower now than steel producers have adopted the new technique? Why or why not?
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