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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