Question

1. problems and applications q7

which of the following government activities is motivated by a concern about efficiency? check all that apply.

• imposing higher personal income tax rates on people with higher incomes
• providing some low - income people with vouchers that can be used to buy food
• breaking up standard oil (which once owned 90% of all oil refineries) into several smaller companies
• regulating cable tv prices
• prohibiting smoking in public places
• instituting laws against driving while intoxicated

Explanation:

• Efficiency in economics refers to maximizing societal welfare by addressing market failures (monopolies, externalities) or ensuring resources are allocated optimally.

1. Progressive income taxes and food vouchers address equity (fair distribution of resources), not efficiency.
2. Breaking up Standard Oil (a monopoly) increases competition, correcting a market failure to improve allocative efficiency.
3. Regulating cable TV prices addresses monopoly power, preventing excessive pricing and improving efficiency.
4. Prohibiting public smoking reduces negative externalities (secondhand smoke), correcting a market failure to improve efficiency.
5. Drunk driving laws reduce negative externalities (accidents, harm to others), correcting a market failure to improve efficiency.

Answer:

• Breaking up Standard Oil (which once owned 90% of all oil refineries) into several smaller companies
• Regulating cable TV prices
• Prohibiting smoking in public places
• Instituting laws against driving while intoxicated