Cigarettes, Children, and the FDA
Read the press release announcing the FDA's 1996 rule designed to restrict children's access to cigarettes.
Questions:
- Provide a number of reasons justifying government intervention in the economy. Based on your reading of the requirements specified by this rule, which of these reasons applies to this FDA rule?
- Why would cigarette manufacturers have an incentive to target children in their advertising campaigns?
- Why are free samples and the sale of small packages of cigarettes banned by this rule?
- Since the purpose of this rule is to restrict consumption of cigarettes by children, it can be reasonably argued that it is designed to correct for imperfect information. Children exposed to advertisements published in magazines or on billboards may be convinced to consume cigarettes without being fully cognizant of the associated health risks.
- Children may be less aware of the risks associated with smoking, are easily subject to peer pressure, and may become addicted for life, resulting in a higher rate of return to advertising targeted at children.
- Since children tend to have small amounts of cash, they would be more likely to experiment with smoking cigarettes if they are either free, or are available in small (less expensive) quantities.
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Suppose we were analyzing the pound per Swiss franc foreign exchange market. If Switzerland's price level rise relative to England and nothing else changes, then the: a. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market rises, causing an appreciation of the Swiss franc
b. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing an appreciation of the Swiss franc. c. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market rises, causing an uncertain change in the value of the Swiss franc. d. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing a depreciation of the Swiss franc. e. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate.
Refer to the diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data suggest that:
A. West Lothian should specialize in, and export, beer.
B. both countries will be better off if they do not engage in specialization and trade involving
these two products.
C. West Lothian should specialize in, and export, pizza.
D. East Lothian should specialize in, and export, beer.