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The health insurance reform signed into law by President Obama in 2010 included the following two provisions. i. Insurance companies must offer health insur ance to everyone who applies and charge them
the same price regardless of a person's preex isting health condition.
ii. Everyone must buy health insurance or pay a penalty for not doing so.
a. Which of these policies taken on its own makes the problem of adverse selection worse? Explain b. Why do you think the policy you identified in part (a) was included in the law?
c. Why do you think the other policy was included in the law?
Consider an economy where population is divided into two groups.
Without government intervention what is labour supply and incomes
Consider a market where the demand is given by QD = 120 - 5/3 P and the supply is QS = 1/3 P. Calculate the consumer and producer surplus.
Explain and illustrate the impact of a minimum wage on the labour market. When is a minimum wage effective? What kind of price control is it?
Illustrate the impact of a specific tax imposed on producers who face a perfectly elastic demand. Who bears the burden of the tax? Would your answer change if the tax is imposed on consumers? Explain why.
A consumer has preferences over two goods, coconuts and fish. The consumer prefers more of each good to less and has a diminishing marginal rate of substitution between the two goods. Draw a diagram showing indifference curves and the budget constraint of the consumer. Explain how the optimal consumption choice is found.
Show the decomposition of the price effect into the income and substitution effect for a price fall for an inferior good.
Why is the slope of the demand for inferior goods steeper than for a normal good? What happens to a normal and an inferior good when the price goes up? Show this graphically and explain.
State and explain the intuition behind the equi-marginal principle of utility maximization.
Illustrate the impact of a specific tax imposed on producers who face a perfectly elastic demand. Who bears the burden of the tax? Would your answer change if the tax is imposed on consumers? Explain why.
