a. In 2006, Medicare Part D was created to subsidize spending on prescription drugs.

What effect would you expect this expansion to have on pharmaceutical prices?

What principle in the chapter would explain this result?

b. Given your answer in part

a, what effect would you predict on pharmaceutical research and development?

c. Whatever answer you gave in part

a, can you think of an argument for the opposite prediction? Hint: In writing the Part D law, Congress said that subsidized drug plans must cover all pharmaceuticals in some

“protected” classes, such as AIDS drugs, but in other areas subsidized plans could pick and choose which drugs to offer. Understanding this difference may lead to different predictions. p=58