QUESTON 1:

Explain why the change is not likely to be a pareto improvement.

In each case, state the loser(if any).

Which of these changes might be approved under the compensation principle?

Which might be approved under a Rawlsian social welfare function?

a. Building a park, financed by an increase in the local property tax rate.

b. Building a park, financed by the donation of a rich philanthropist; the city acquires the land by exercising the right of eminent domain.

c. Increasing medical facilities for lung cancer, financed out of general revenues.

d. Increasing medical care facilities for lung cancer, financed out of an increase in the cigarette tax

e. Replacing the system of agricultral price supports with a system of income supplements for poor farmers.

f. Protecting the automobile industry from cheap foreign imports by imposing quotas on the importation of foreign cars.

g. Increasing social security benefits, financed by an increase in the payroll tax

h. Replacing the primary reliance at the local level on the property tax with state revenues obtained from an income tax.

i. Eliminating rent control laws.

QUESTON 2:

Many government programs both redistribute income and correct a market failure. What are the market failure associated with each of these program and how else might they be addressed if there were no distributional objectives?

a. Student loan program

b. Public elementary education

c. Public support for universities

d. Social security