1. Suppose you were to analyze the state and the economy at the moment. You say to your friends, “The economy has been growing more slowly in the last 10 years than it did in the previous 20 years. The government should cut taxes to stimulate the economy.” What portion of that statement is “positive” and what portion of that statement is “normative”?

2. Suppose you decided to study all last week for this exam instead of doing anything fun. What was the opportunity cost of doing so? Why might the opportunity cost (defined in terms of fun lost) be expected to increase?

3. Obesity and smoking are both linked to numerous adverse health consequences, including heart disease, cancer, and strokes, among others. The Affordable Care Act permits health insurance companies to charge people higher premiums if they smoke or are obese. But the law forbids the companies from charging higher premiums or denying coverage to people who have suffered strokes or have heart disease or cancer.
a. Can you suggest a rational argument why the law might be structured this way?
b. How could this be designed to affect a shift in the demand curve for soft drinks or cigarettes?
c. Could this law be a better way to influence purchase of soft drinks rather than the tax the Bloomberg tried to enact? You must be sure to describe and explain Bloomberg’s prohibition.

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ANSWER PART 1 The first statement comparing the state of the economy from previous 10 years to that ... View the full answer