Question

Explain whether each of the following government activities is motivated by a concern about equality or a concern about efficiency. In the case of efficiency, discuss the type of market failure involved.

a. regulating cable TV prices

b. providing some poor people with vouchers that can be used to buy food

c. prohibiting smoking in public places

Answer 1

Answer:-

1). Regulating cable TV prices shows the government's concern about efficiency. The market failure involved is due to market power where a small group of persons or a single person unduly influences market prices.

2). Providing vouchers to some poor people to buy food shows the government's concern about equity and that there will be the more equitable distribution of economic well-being.

3). Prohibiting smoking in public places is a governmental attempt at efficiency. The market failure involved with smoking is known as an externality. It shows the negative impact of the smoker's actions on the well-being of a bystander.