Economics - McConnell Flynn - 19 edition. Chapter 17. Textbook solutions

17.1 Because medical records are private, an individual applying for health insurance will know more about his own health conditions than will the insurance companies to which he is applying for coverage. Is this likely to increase or decrease the insurance premium that he will be offered? Why? L01
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17.2 Why is it in the interest of new homebuyers and builders of new homes to have government building codes and building inspectors? L01
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17.3 Place an “M” beside the items in the following list that describe a moral hazard problem and an “A” beside those that describe an adverse selection problem. L01a. A person with a terminal illness buys several life insurance policies through the mail.b. A person drives carelessly because she has automobile insurance.c. A person who intends to torch his warehouse takes out a large fire insurance policy.d. A professional athlete who has a guaranteed contract fails to stay in shape during the off-season.e. A woman who anticipates having a large family takes a job with a firm that offers exceptional childcare benefits.
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17.4 Explain how affirmative and negative majority votes can sometimes lead to inefficient allocations of resources to public goods. Is this problem likely to be greater under a benefits-received or an ability-to-pay tax system? Use the information in Figures 17.1a and 17.1b to show how society might be better off if Adams were allowed to buy votes. LO2 Reference Figures 17.1a and 17.1b ...
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17.5 Explain the paradox of voting through reference to the accompanying table, which shows the ranking of three public goods by voters Jay, Dave, and Conan:...
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17.6 Suppose there are only five people in a society and each favors one of the five highway construction options listed in Table 5.4 (“No new construction” is one of the five options). Explain which of these highway options will be selected using a majority paired-choice vote. Will this option be the optimal size of the project from an economic perspective? LO2 Reference Table 5.4 ...
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17.7 Jean-Baptiste Colbert was the Minster of Finance under King Louis XIV of France. He famously observed, “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” How does his comment relate to special interests and the collective-action problem? L03
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17.8 What is rent seeking and how does it differ from the kinds of profit maximization and profit seeking that we discussed in previous chapters? Provide an actual or hypothetical example of rent seeking by firms in an industry. By a union. By a professional association (for example, physicians, school teachers, or lawyers). Why do elected officials often accommodate rent-seeking behavior, particularly by firms, unions, and professional groups located in their home states? L03
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17.9 How does the problem of limited and bundled choice in the public sector relate to economic efficiency? Why are public bureaucracies possibly less efficient than business firms? L03
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17.10 Explain: “Politicians would make more rational economic decisions if they weren’t running for reelection every few years.” L03
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17.11 LAST WORD How do the concepts of pork-barrel politics and logrolling relate to the items in the Last Word?
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