PADM 5006 Exam 1 Fall 2015

Use separate sheets of paper as needed to answer.Please be sure to show all the work, the part of the exam you are answering, and the number of the question you are answering.When done staple together all your work with this copy of the questions on front and hand them in.

Part I (60 points): Please briefly explain your responses.

1. Some large retail food chains and pharmacy groups have agreed to freeze prices on "socially important necessities" partly in hopes of avoiding bigger government crackdowns on prices allowed because the Russian government wants to fight inflation (http://news.yahoo.com/russian-supermarkets-freeze-prices-inflation-weary-shoppers-052409224.html, https://www.rt.com/business/236737-russia-retailers-prices-inflation/).A) Do you see any problem with this strategy? B) Include a demand & supply sketch in your answer.C) What is likely to happen to the prices of other goods?

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. Are public restrooms a public good (or near public good)?Why or why not?

4. Using sunscreen on your skin reduces the risk of death due to melanoma, squamous cell carcinoma, and basal cell carcinoma; skin cancer rates have been rising.Sunscreen also helps prevent painful burns, prevents spotting and blotchiness, reduces skin damage and slows skin aging (https://www.psychologytoday.com/blog/changepower/201307/wear-sunscreen-new-study-reveals-amazing-benefits). Suppose a sunscreen lobby group suggests that since sunscreen clearly provides significant positive externalities your government agency should provide subsidies for sunscreen. Please respond to their argument for funds from your budget.(By the way there actually are at least 3 sunscreen lobby groups http://www.opensecrets.org/news/2012/05/sunscreen-lobby/).

5. 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.

6.What are some of the major criticisms of the definition of the poverty line used in the U.S.?(8 pts.)

Briefly how does the new supplemental measure of poverty try to do better? (2pts.)

Part II (40 points): Please explain your responses fully.

1.Pollution in California's waterways has increased, for example "the number of fish with... mercury and other toxins too high for human consumption increased 24 percent...Pesticide pollution increased 36 percent"and excessive trash is up 76% (http://www.sfgate.com/science/article/EPA-California-waters-show-widespread-pollution-2326936.php) .Based on the Coase Theorem, why might it be desirable for the government to be involved in this issue? What are some of the advantages and disadvantages of the 5 usual alternative approaches to dealing with externalities in terms of these problems? Which approach(es) would you recommend for this issue?

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?