PADM 5006 Exam 1 Fall 2010
Use separate sheets of paper as needed to answer. Please be sure to put your name on your answer sheets, the part of the exam you are answering, and the number of the question you are answering. When done staple together all your answer sheets with this copy of the questions on front and hand them in.
Part I (60 points): Please briefly explain your responses.
2. Why should you care about the elasticity of demand and elasticity of supply for a good you are considering subsidizing? Include a demand and supply sketch in your explanation.
3. Do you consider
4. Pumpkins have been found to be high in nutrients that help in fighting diseases such as cancer, vision problems including cataracts, heart disease, Alzheimer’s disease, obesity, skin damage, high blood pressure, and stress. (http://www.suite101.com/content/health-benefits-of-pumpkin-a153140) Suppose the Pumpkin Growers Association argues that since pumpkins clearly provides significant positive externalities your government agency should provide subsidies for pumpkin growers. Please respond to their argument for funds from your budget.
5. What is a shadow price and why might you use a shadow price?
6. What’s the difference between a social insurance program and an income redistribution program? Please give an example of each and explain how the justifications differ.
Part II (40 points): Please explain your responses fully.
2. a) What is Social Security?
b) How does Social Security work?
c) Why are some problems with Social Security anticipated?
d) What are some alternatives for dealing with these problems?