Questions and Answers of Applied Welfare Economics

Assume β = 0.2. What would the difference in family line income be after three generations? Would that be a highly mobile society
What have your parents given to you to facilitate your future success? What about you seems unique and not at all related to your parents?
Re-do question 2, but this time employ a model like that in Chapter 18 that allows for parents to bequeath physical wealth to their children along with human capital. Draw the appropriate graph.
What are some aspects of Canadian society that make for greater equality and mobility? Could the United States easily emulate Canada?
Is there a healthy degree of intergenerational mobility in the United States or is the degree of intergenerational mobility distressingly low?
Assume all parents have one child, parents can be either rich or poor, parents can be either highly altruistic or not very altruistic toward their child, and the child can be either dumb or smart.
What does the intergenerational elasticity measure? What is the current consensus of the value of the intergenerational elasticity for income? Explain why the intergenerational elasticity is not
What policies from Chapter 18 would you favor to reduce poverty?
What is meant by the term “working poor?” Are the working poor better or worse off than the non-working poor?
Will the “poor always be with us?” Examine all the issues.
How responsible are people for their own poverty? What responsibility does the government have in the alleviation of poverty?
Is the extent of poverty measured correctly in the United States?
What are some situations where you (or someone you know) succumbed to peer pressure? Does the argument about neighborhood effects seem valid to you?
Which results for MTO do you find most troubling? Why do you think those troubling results occurred?
Read any history of the Public Housing program in the United States and it will be depicted as a failure of epic proportions. Why do you think it was a failure?
Should government policy have a goal of reducing segregation in our neighborhoods? What sorts of policies could the government use to reduce segregation or is it a hopeless case?
What is redlining? Why would a bank engage in such a practice?
(This is actually a health-related question even if it does not seem like it.) The National Hockey League with the support of the players’ union requires that players wear helmets while on the
Graphically depict the effect of the employer mandate from Obamacare on the wages that workers receive. How does the elasticity of supply of labor influence the result?
Why should the health of your neighbor be your concern?
What is the difference between a free good and an economic good? Are there any free goods out there? Why is health care an economic good?
Come up with a list of five mandated benefits that employees receive. Can each be justified as good policy?
How does the elasticity of supply of labor affect the sharing of the costs of a mandated benefit? Draw graphs to illustrate the effect of a low and a high elasticity of supply.
In 2022 in the Dobbs decision, the Supreme Court overturned Roe v Wade. What was the Dobbs decision? How might it affect women’s career aspirations, and the sexual relations between men and women
“Mandated benefits are free to the employee. They are simply financed out of the employer’s profits.” Discuss.
What was the fate of the ADA Restoration Act of 2007? What are the positive and normative economic issues involved in deciding whether that was an appropriate outcome?
How has the Age Discrimination in Employment Act changed over time? Are there any occupations which should have a mandatory retirement age? Explain your answer.
The Equal Pay Act of 1963 prohibited employers from paying different wages to workers who performed the same work but differed by gender. There were four exceptions to this standard. List the four
What are the trade-offs involved in affirmative action? Do you consider affirmative action to be a fair policy? What efficiency loss would you be willing to tolerate for a successful affirmative
Review the Employer Discrimination case of the Personal Prejudice model. What are the long-run predictions of this model? What are the implications of this model for the Weber v United Steelworkers
Develop a model of the effect of labor market discrimination on personal investments in education. What would your model predict about the effect of affirmative action programs (as in Weber or
As a matter of law and a matter of economics are the anti-discrimination laws interpreted correctly by the courts?
To be promoted to lieutenant, police officers in a city police department first have to pass a written aptitude test. This requirement was challenged in court by several black officers on the grounds
If a beautiful salesperson is more successful selling a product than others not so attractive, is the beautiful salesperson more productive?
In your judgment, was the Court’s legal reasoning in the Jones v Catastrophe Management Solutions case sound?
Jarrell and Stanley found that the gender wage gap in several studies ranged from –5 percent to +77 percent (Jarrell and Stanley 2004). What could account for such a wide variation in results? How
Men of Russian ancestry earn 57 percent more than the U.S. average. Does this mean that there is no discrimination against Russians in the United States? If not, how could such discrimination be
a. If the firm is a profit-maximizer, what wage offer will Jason receive?b. If the firm is a profit-maximizer, what wage offer will Mario receive?c. Would the firm offer Jason a wage of $25 if this
Jason and Mario take a skills test, which is accurate 25 percent of the time and receive identical scores of
Jason is a member of group J, who are less productive on average than group M, Mario’s group. The average productivity of group J is 15, while the average productivity of group M is
How are the predictions of the Self-Confirming Expectations model influenced by differences in productivity, the accuracy of the test, and training costs?
Is the discrimination in the Crowding Hypothesis model rational or irrational? Explain your answer.
Is statistical discrimination “worse” than personal prejudice? Investigate this question and all its ramifications.
On the basis of the Personal Prejudice model of employer discrimination, would discrimination be more widespread in competitive or monopolistic industries? Explain.
If we establish a UBI program in the United States, which, if any, current safety net programs should be retained?
How would you respond to your drunk uncle who says “we give money to people who don’t work so they can live ‘high on the hog’?”
What does it mean for a tax credit to be refundable? Should tax credits ever be refundable?
Explain the labor supply response of workers to the “phase in,” plateau,” and “phase out” regions of the Earned Income Tax Credit.
Jed is able to earn $8 per hour on the job. Draw his budget constraint assuming 480 possible work hours per month and that Jed receives no other income. Sketch in an indifference curve showing Jed
Should all welfare programs be turned into cash programs? Explain your answer.
It has been proposed by Republicans that recipients of SNAP and Medicaid should have work requirements. What do you think?
What are the benefits of a high tax rate on large estates? What are the costs?
How do our inheritance laws deal with inter-vivos transfers of wealth? Is this fair?
Create a spreadsheet model to calculate individual wealth accumulation under different assumptions regarding the individual’s starting salary, starting wealth, rate of savings, and rate of return
Using the model of inheritance introduced in this chapter, how would the introduction of a confiscatory tax on inheritance change the parents’ plan regarding bequeathing human capital versus cash?
What conditions would be required for bequests to add to wealth inequality? What is the likelihood those conditions will occur simultaneously?
What is the relationship between imperfect capital mobility and the accumulation of large personal fortunes?
How does the degree of parental altruism affect the composition of the bequest given to their children?
Using the model of inheritance introduced in this chapter, what will the equilibrium outcome be if the child of rich parents is more able than the child of poor parents? What will the outcome be if
What other incentives might influence the work effort of labor besides monetary ones?
How is the peak of the Laffer Curve influenced by the elasticity of supply of labor?
Most states have a system of worker’s compensation. Employers are taxed and the money goes into a fund to provide financial support for workers who are injured on the job. What is the incidence of
Using Andrea’s tax table, what is Maria’s ATR and MTR on taxable income of $90,000?
If Andrea has $10,000 in taxable income, her tax liability is using the tax table provided is what? On Taxable Income The Tax Rate is … Up to $7,000 10 From $7,000 to $30,000 15 From $30,000 to
Pat figures that for every dollar they earn, they owe the government 33 cents. Their total income now is $35,000 on which they pay taxes of $7,000. What is Pat’s average tax rate? What is Pat’s
What would the definitive test of the effectiveness of educational vouchers be?
Why should the government be involved in financing education at all? Shouldn’t it be entirely the responsibility of parents to provide for their children, and not the responsibility of childless
Most states fund their schools with a combination of local, state, and Federal money. How does that lead to inequality in the provision of educational resources? Do you consider that a significant
Think about your own experience with elementary and secondary education. How was your education made available to you? What were the good aspects of it? What needed improving?
Should the nation regulate who can and cannot be a parent? Why do you think that way?
According to Becker and Murphy, educational attainment is not responding to the clear incentives provided by the market. Why do you think that is? Please go beyond the reasons given in this chapter.
Do your own research about one of the early intervention programs mentioned in this chapter. Would you consider them successful? Are you confident they could scale up to nationwide programs?
What are the differences between cognitive and noncognitive skills? Why are both essential to being successful in school?
Are there states that have programs like WOTC? How are they similar to the Federal WOTC? How do they differ?
Assume a job requires no on-the-job training and worker skills do not increase with the simple passage of time. If the present value of the wage payments were the same, why might the worker prefer
Women receive lower wages, on average, than men of equal age and the disparity between the earnings of men and women grows with age. Use human capital theory to explain why. (To help you develop your
What would you rather live in—a society with a high degree of absolute mobility, but a low degree of relative mobility or a society with a high degree of relative mobility and a low degree of
Explain how your actions influence your lifetime earnings. What factors influencing lifetime earnings are outside your control? Why might two people born at the same time end up with different
Let’s say you own a used car lot. You buy cars from their owners and then turn around to sell them to people in need of cheap transportation. As a buyer of cars what type of adverse selection
What types of human capital are you investing in right now? What are the costs and benefits of each?
What should Peter do if his rate of discount is 20 percent? What should Peter do if his rate of discount is 5 percent? What explains the difference in the results?
Finally, he can get a doctorate degree after completing his college education. Going to graduate school in period 2 will cost $15,000. After getting his doctorate, he will become a professor in a
Peter has just graduated from high school. He will live for three more periods, and he is considering three alternative education-work options. He can start working right away, earning $100,000 in
Doogie graduates from high school and will live two more periods. He can go directly to work and earn $20,000 each year or he can spend $5,000 next period and receive an advanced certificate so the
If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received in six years?
Consider a payment of $1,000 one year from now. The interest rate is 6 percent. How much is this worth in today’s dollars?
If the discount rate is 10 percent, what is the present value of $500 in one year?
Junior must decide whether to accept $125 today or $150 one year from today.a. If Junior’s internal rate of time preference is 14 percent, what will be do?b. If Junior’s internal rate of time
In the case of CEO compensation, what is the best comparison? Is it between the top 500 CEOs and the typical worker, or the average CEO and the typical worker? Justify your answer.
An important thing to remember about tournaments is that they reward relative performance (how people do compared to the others they are pitted against) rather than absolute performance (the quality
In the 19th century, musicians made a living by traveling from town to town and performing for audiences. What about the technology of the time likely influenced their earning ability? What
Are there superstar plumbers? What about the nature of the market for plumbers influences your answer?
g. What would wage and employment be if the minimum wage was $21? Draw the graph.
e. What would wage and employment be if the minimum wage was $15? Draw the graph.f. Assume a minimum wage of $21 is legislated. Fill in W @ 15 and MFC @
Use the table below to answer the following questions. Q W MFC W @ 15 MFC @ 15 W @ 21 MFC @ 21 D 1 10 $30 2 11 $27 3 12 $24 4 13 $21 5 14 $18 6 15 $15 7 16 $12 8 17 $9 9 18 $6 10 19 $3a. Fill in the
Use the table below to answer the following questions. Q Employer Willingness to Pay Worker Opportunity Cost Minimum Wage = $15 0 17 7 $15 1 16 8 $15 2 15 9 $15 3 14 10 $15 4 13 11 $15 5 12 12 $15 6
Could an objective scholar make a convincing argument in favor of a higher minimum wage if the scholar believed the evidence supported the conclusion the minimum wage was a job-killer,
True/False and Explain. If labor is hired in a monopsonistic market, a minimum wage will always guarantee employment will increase.
Figure 10.4 shows the market for bank tellers.a. If a price floor of $11.50 was imposed on the market, how many bank tellers would be hired?b. If a price floor of $8.50 was imposed on the market, how
Tax policy raises $X from the rich to redistribute to the poor, but there is a leak in the bucket. How big a leak do you think should be tolerated in the effort to redistribute income?

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