A. From time to time, the city of Chicago provides free concerts. Can this program be rationalized on the basis of welfare economics? Relate the program to the concept of merit goods.
b. Some say, "Small corporations should face lower tax rates than large businesses, just as individuals with low incomes should face lower income tax rates than those with high incomes." What view of the corporation is implicit in this statement? Contrast this view with the view of conventional economics.
c. In his State of the Union address in 2002, President Bush said, "To achieve these great national objectives-to win the war, protect the homeland, and revitalize our economy-our budget will run a deficit that will be small and short-term." Under what conditions, if any, is it sensible to use a deficit to finance a war?
a. From time to time, the city of Chicago provides free concerts. Can this program be rationalized on the basis of welfare economics? Relate the program to the concept of merit goods.
From the perspective of welfare economics, the city may use microeconomic techniques to improve allocative efficiency within the city. From this view point the free concerts provide opportunity for each citizen irrespective of his financial status to enjoy the concert. Even those who cannot afford the price of the tickets can enjoy the concert. So this is a direct method of improving allocative efficiency.
Merit goods are those goods that people decide through a political process to have provided by the government. These are also goods that are believed to have greater value than what is reflected in their market price. In case of the city of Chicago, the people of the city have decided that the concert should be available to the people of the city free of cost. The concerts are so valued by the people of the city of Chicago ...
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