Explain why government, rather than private firms, is required for efficient mosquito eradication programs.
What will be an ideal response?
Mosquito eradication is a public good. It is nondepletable, so benefits to one do not reduce benefits available to others. It is also nonexcludable, so it would be difficult to prevent free riders. For both these reasons, there is no opportunity cost to protecting an additional user. There is also the inability to keep out nonpayers even if it were efficient to charge (which it isn’t). The government must provide the good if there is to be efficient protection.
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What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery?
A) Supply will decrease, but this will not shift the demand curve. B) Demand will decrease and supply will increase. C) Demand and supply will both decrease. D) Demand will decrease, but this will not shift the supply curve.
Under Purchasing Power Parity
A) E$/E = PUS/PE. B) E$/E = PE/PES. C) E$/E = PUS + PE. D) E$/E = PUS - PE. E) E$/P = PUS/PE.