PADM 5006 Exam 1 Fall 2011
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.
1. “The government surprised businesses on January 6, the Ethiopian Christmas Eve, by announcing price caps on such items as meat, bread, rice, sugar, powdered milk and cooking oil.” (http://www.voanews.com/english/news/Price-Controls-Cause-Chaos-in-Ethiopian-Markets-114585164.html). Do you see any problem with the Ethiopian Prime Minister’s strategy to reduce high prices for these goods? Include a demand & supply sketch in your answer.
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 police services a public good (or near public good)? Why or why not?
4. Brussels sprouts have been found to be high in nutrients that help in fighting diseases such as cancer, promote DNA repair, reduce cholesterol and help in detox. Suppose the Brussels Sprouts Growers Association of California argues that since brussels sprouts clearly provide significant positive externalities your government agency should provide subsidies for brussels sprouts. Please respond to their argument for funds from your budget.
5. Many public projects are intended to promote health and safety and so some of their benefits are reduced risk of loss of life. How are values for such a benefit estimated?
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?