1. Chalabekov, a government official, suggests that if we want to end poverty, we simply need to pay everyone with income below the poverty threshold the difference between the poverty threshold and what they are earning. Chalabekov argues that, based on the number of people currently below the poverty threshold, this would cost $24 billion per year. Why is Chalabekov understating the costs of the program? (10 points) 2. Recently, there have been several proposals to privatize the social insurance system; some countries have actually privatized part or all of their social insurance systems. Present two arguments against and one argument in favour of doing this? The government is considering the provision of social security to the retired and disabled What are the market failures that could have given rise to this policy? (2 points) What are the possible forms of government intervention? How do private sector responses weaken, or reinforce, the intended effects of the policy? (4 points) What are the major efficiency consequences of the policy? (2 points) Are there important instances of trade-offs between equity and efficiency in the policy design? Explain. (2 points) For each of the cases below, what difference does it make if poor individuals own OR rent their houses? A government regulation that reduces the allowable level of noise for aircraft. (Assume that those who live in the neighborhood of the airport are relatively poor.) (2 points) A subway line intended to make it less expensive for those in low-income neighborhoods to get to jobs in the city center. (2 points) The Musaffo zamin program is intended to clean up toxic waste sites. Currently a disproportionate number of poor people live near toxic waste sites. (2 points) If you wish to incorporate the distributional consequences into the cost-benefit analysis of the above policies and programs, how might you do so? (4 points) Assume that, in a family, the husband is the primary earner and the wife is the secondary earner. If the government taxes individuals on the basis of their individual income, for whom is the substitution effect of an increase in income tax more likely to outweigh the income effect? Explain. (10 points)