Answer to Question #309665 in Macroeconomics for Isay

Question

1. Explain whether each of the following government activities is motivated by a concern about equality or a concern about efficiency. In the case of efficiency, discuss the type of market failure involved. a. regulating cable TV prices b. providing some poor people with vouchers that can be used to buy food c. prohibiting smoking in public places d. breaking up Standard Oil (which once owned 90 percent of all oil refineries) into several smaller companies e. imposing higher personal income tax rates on people with higher incomes f. instituting laws against driving while intoxicated 

Answer 1

a, Government regulating cable TV price is an act of equality in the market so as to reduce chances of consumer exploitation.

b.providing poor people with voucher to buy food is equality where the government is trying to reduce the rate of poverty in a country.

c, prohibition of smoking in public places is equality meaning that everyone in the public is equal and no one is special than the other.

d, breaking standard oil is an act of efficiency so as to fight monopoly in the economy since a monopolistic business tends to control the market prices which in most cases can be a negative control

e, imposing higher personal income tax rates on people with higher income is an act of equality this is supported by the principal of PAYE so as to balance the people with Less income and high in come..

f, instituting laws against driving while intoxicated is an act of efficiency this is to prevent accident and many other self and public damages. The type of market fair is known as missing markets since the public is in need of defence.