The average weight of American adults increased by about 10 pounds in the 1990s. In November 2004, it was reported that U.S. airlines spent $275 million more in fuel costs to transport this additional weight

a. Under what circumstances would this increased cost be an externality of obesity and overweight, and under what circumstances would it not be an externality?

b. Assume that obesity does impose a negative externality and the main cause is high sugar intake, use a demand and supply model to illustrate the market outcome and the socially optimal outcome
c. Consider three policy options
1) a sugar consumption tax
2) a regulation requiring restaurants to display calories on their menus, 
3) Banning soda and junk foods from public school cafeterias, illustrate the effect of each policy with a demand and supply model. Discuss the efficiency and equity implications for each policy.

Answer rating: 100% (QA)

a The increased fuel cost due to increased weight could be considered an externality of obesity and overweight if it is an unintended consequence of i... View the full answer