The government of Mexico City recently began distributing the drug Viagra at a highly subsidized price to

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The government of Mexico City recently began distributing the drug Viagra at a highly subsidized price to low-income elderly men. Suppose that the government gives each recipient six pills per month at a price of $1 per pill, and the market price is $10 per pill. Can we conclude that an individual participating in the program would be worse off if provided with a cash grant of $50 instead of the Viagra?

(Hint: Analyze a model in which the individual chooses between two commodities, “Viagra pills” and “all other goods.”)

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Public Finance

ISBN: 9780073511351

9th Edition

Authors: Harvey Rosen, Robert Guell, Ted Gayer

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