Start New Topic
  
  
  
Top Posters
Since Sunday
32
14
14
14
13
13
13
13
12
11
11
11
A free membership is required to access uploaded content. Login or Register.
Chapter 24 - The Economics of Health and Healthcare, 7/E
University of Louisville
Uploaded: A year ago
Contributor: Dennisronja
Category: Economics
Type: Solutions
Rating: A (1)
Filename:   Folland_EHHC7_CH24_IM.doc (91 kB)
Page Count: 1
Credit Cost: 1
Views: 323
Downloads: 11
Last Download: 2 months ago
Description
Contains multiple choice questions @ the end!
Transcript
Chapter 24 – The Health Economics of Bads Key Ideas We typically speak of goods that bring utility to the users. In this context “bads” would be items that actually harm the individuals. Examples include drugs such as heroin or cocaine. Some are illegal. Other items such as alcohol or cigarettes are regulated by age. Rational addiction models explain the use of bads in an internally consistent utility maximizing framework. For example, just like learning to like Mozart early allows one to enjoy Mozart later in life, learning to smoke early in life makes smoking more pleasurable later in life. Policies to address the use of bads include taxation, advertising bans, or outright prohibition. Most studies indicate that increased taxes can reduce the use of alcohol or tobacco. Teaching Tips Regulations come with both benefits and costs. What are the benefits to society of rules regarding the use of bads? What are the costs? Given the costs of interdicting drugs, for example, is the optimal amount on American streets zero? Knowing what we know about cigarettes, why should anyone start smoking? Yet we know that many people (particularly teen-agers) do. How can utility maximization explain this? Many states have imposed substantial cigarette taxes over the past ten years? What is the impact on smoking in these states? on the purchase of cigarettes? on crossing the borders to other states to buy cigarettes? Economic bads are an ideal subject on which to look at treatment across countries, with respect to taxes, prohibitions, and criminal sanctions. Economics students should understand that there are other models of addiction other than rational addiction. The National Institute for Drug Abuse and the National Institute for Alcohol Abuse and Alcoholism web sites both have substantial information. See Drug Abuse – _http://www.nida.nih.gov_. Alcohol – _http://www.niaaa.nih.gov_. Chapter 24 – The Health Economics of Bads – Multiple Choice Addiction is termed “myopic” if: consumers are unaware of current hazards. consumers underestimate future hazards.* the good in question affects one’s eyesight. the good in question effects other through externalities. Addiction is termed “rational” if: current addictive behaviors will increase future utility.* current addictive behaviors will decrease future utility. current addictive activities give current pleasure. future addictive activities give current pleasure. Box 24-1 indicates that ________ has the highest per capita consumption of alcohol among the countries listed, with ______ having the highest percentage smoking tobacco: France; Greece. the United States; Ireland. Russia; Spain. Luxembourg; Greece.* Box 24-1 indicates that residents of the United States drink ____ than the OECD average, and residents of the United Kingdom drink _____ than the average. less; more.* less; less. more; more. more; less. Caffeine ___ an addictive drug because _______: is not; exhibits reinforcement but not tolerance.. is: exhibits reinforcement and tolerance.* is not; exhibits tolerance but not reinforcement. is not; it is not harmful. In Figure 24-3, for smoking, the term “steady state” means that an addicted smoker has a(n) ____ addictive stock. increasing. decreasing. U-shaped. constant.* In Figure 24-3, for smoking, point E is an unstable equilibrium because: smoking is an addictive habit. cigarette smoking is an inferior good. increasing cigarette consumption builds addictive capital, leading to still more smoking.* Answers (a) and (b) are correct. In Figure 24-3, if addictive capital depreciation rate falls from δ = 0.10 to δ = 0.05: the equilibrium level of smoking, the steady state line rotates clockwise, and smoking increases.* the equilibrium level of smoking, the steady state line rotates counterclockwise, and smoking decreases the equilibrium level of smoking, the steady state line rotates clockwise, and smoking decreases. the smoker quits “cold turkey.” In Figure 24-3, if the price of cigarettes rises, the consumption of cigarettes could go from C4 at point D′ to: C3 at point D. C2 at point B′. C5 at point E. zero at point F.* In Figure 24-3, point E is an unstable equilibrium because: if one consumes more than S0, it will build addictive stock consistent with a higher level of smoking if one consumes less than S0, it will decrease addictive stock, consistent with a lower level of smoking smokers tend to be unstable at low levels of smoking. Answers (a) and (b) are correct.* In rational addiction models, long run impacts are larger than short run impacts because: the addicted person must be advised what to do. it takes time for the addictive stock to adjust.*. advertisers try to persuade addicts not to stop using the good. it is costly for the addict to stop his or her addiction. Cigarette manufacturers advertise because: the industry is perfectly competitive, and producers need to increase their market shares the industry is an oligopoly, and producers need to increase their profits. firms in the industry seek to induce people to begin smoking. Answers (b) and (c) are correct.* Manufacturers of legal addictive substances argue that they continue to advertise in order to: get people to start using the substances. get people to switch brands.* raise more tax monies for the government. None of the above are true. Manning and colleagues estimated the external costs of smoking to be the equivalent of 33 cents per pack for a new smoker evaluated in 1995 dollars. This implies that: a tax of 33 cents should be levied on new smokers to impose the full societal costs. cigarettes were too cheap, leading to over-consumption. the government needed tax revenue from cigarettes. Answers (a) and (b) are correct.* Hamilton’s research found the U.S. television and radio advertising ban to be ineffective in reducing smoking because: people paid little attention to advertising. demand was inelastic. the ban was accompanied by the reduction of anti-cigarette messages.* smokers switched to other forms of tobacco. Moore’s 1995 research suggested that a 10% increase in cigarette excise taxes would save ____ lives per year in the United States: 600. 3,700.* 11,500. 19,200. A primary category of external costs associated with alcohol consumption is: taxes paid to governments. traffic injuries and fatalities occurring to those who have consumed alcohol. traffic injuries and fatalities to those who are involved in accidents caused by those who have consumed alcohol.* cigarette smoking by those who drink. Saffer estimates that bans on alcohol advertising could reduce traffic fatalities by between _______ and ________ lives per year: 2,000; 10,000.* 4,000; 15,000. 8,000; 20,000. 10,000; 25,000. Suppose that cigarettes cost $2.50 per pack, and a state imposes a $1.00 per pack excise tax. In response, average cigarette consumption decreases by 10 percent. This would indicate a price elasticity of: –0.03. –0.30.* –1.00. –3.00. Suppose that cigarettes cost $3.50 per pack (including taxes), and a state imposes an additional $1.50 per pack excise tax, In response, average cigarette consumption decreases by 10%. This would indicate a price elasticity of: -0.08 -0.18 -0.28* -3.53  In the figure above, suppose that a $3 increase in liquor excise tax leads to the equilibrium shown. This indicates a: demand elasticity of approximately –0.5.* supply elasticity of approximately +1.0. demand elasticity of approximately -0.0. supply elasticity of approximately +0.0. In the figure above, assuming a $3 increase in the liquor excise tax, the total tax revenue to the state is: $900. $2000. $2700.* $3000. In the figure above, assuming a $3 increase in the liquor excise tax, the _____ bear the larger share of the tax because ______. consumers; the producers are monopolists consumers; the demand is less responsive (elastic) to price than the supply.* producers; the supply is less responsive (elastic) to price than the demand.. producers; consumers will buy their liquor elsewhere. If the demand elasticity is between 0 and -1.0, an increased tax on tobacco or alcohol will: increase consumption and increase tax revenues. decrease consumption and increase tax revenues.* decrease consumption and decrease tax revenues. have no impact on consumption or tax revenues. Following World War II, the federal excise tax on cigarettes in the United States fell as a proportion of the cigarette price because: cigarette prices rose. the tax was raised only intermittently as cigarette price rose.* cigarette prices fell due to decreased demand. the tax was decreased due to political pressure. Following World War II, the federal excise tax on cigarettes in the United States fell as a proportion of the cigarette price because: cigarette prices rose. the tax was raised only intermittently as cigarette price rose.* cigarette prices fell due to decreased demand. the tax was decreased due to political pressure. As of 2012, combined state and federal cigarette taxes are as high as ____ per pack with the state taxes generally constituting a ____ share. $1.52; smaller. $2.00; larger. $3.27; smaller. $4.47; larger.* The following policies have all been tried to reduce the use of addictive substances: advertising bans. excise taxes. prohibition. Answers (a), (b), and (c) are correct.* Which of the following statements is false? Economists view advertising as a complementary good. Economists view advertising as a waste of resources.* Economists view advertising as barrier to entry. Economists view advertising as consumer information. If a government prohibits the production and consumption of alcohol or tobacco: consumption will fall to zero because the good will not be available. consumption will fall because demand will fall. consumption will fall because supply will fall. Answers (b) and (c) are correct.*
Related Downloads


Explore
Post homework questions online and get free homework help from tutors.
Learn More
Improve Grades
Help Others
Save Time
Accessible 24/7
  278 People Browsing
Poll
In one word, how would you rate our website?
Awesome
Mediocre
Other
Good
If you would like to vote in this poll, please login or register