Public Policy Study Questions ESSAY

Public Policy Study Questions

Short Answer Questions –

1. Shipping costs have increased dramatically in the past several months due to supply chain problems. What do you think this has done to the price and quantity of groceries sold? Explain in words and graphically.

2. In your answers to problem set #2, many of you argued that it would be better to provide a per-visit subsidy for visits to the dentist rather than imposing a maximum price on dental visits. Exploring this idea further, explain in words and graphically whether access to dental care as defined in problem set #2 would increase with a per-visit subsidy.

3. Continuing with question 2, would a policy of providing a per-visit subsidy for dental visits be more successful with a relatively price inelastic or relatively price elastic supply curve? Explain in words and graphically.

4. Over the course of the COVID-19 pandemic, many people have decided that it is important to them to live outside of a big city and in less dense areas with more access to nature. What has this done to housing prices in cities and housing prices outside of cities? Explain in words and graphically.

5. Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez have proposed to cap the interest rate that can be charged on credit card loans at 15% and framed it as a way to help consumers. Does their proposal help consumers? Determine the change in consumer surplus if this policy were implemented and interpret the components of the change in consumer surplus as part of your answer. Explain in words and graphically.

6. Universal pre-K is part of the recent safety net spending bill proposed by Democrats in Congress (“universal pre-K” means that tuition-free pre-kindergarten would be available at all families in the U.S.). What would you expect to happen to the hourly wage and the number of hours that people are employed if universal pre-K were passed? Explain in words and graphically.

7. Consider two cities, one with a lower free-market wage and one with a higher free-market wage. Assume that a federal minimum wage is implemented that is above each city’s free market wage. How much is employment expected to change in each city when the federal minimum wage is implemented? Given the graphs that you have drawn, which city has the biggest change in producer surplus when the federal minimum wage is implemented? Explain in words and graphically.

Long Answer Question –

Some policymakers are in favor of using taxes on sugar-sweetened beverages (“SSBs”) as a way to get people to consume fewer SSBs; other policymakers are in favor of using taxes on SSBs as a way to raise tax revenue.

a. Would a per can tax on SSBs be better at reducing the quantity of SSBs consumed if the demand for SSBs were more or less price elastic? Assume that the tax would be statutorily imposed on the suppliers of SSBs and that it would apply to all purchases of SSBs regardless of where they were purchased. Explain in words and graphically.

b. Continuing with the assumptions from part (a), would a per can tax on SSBs be better at raising tax revenue if the demand for SSBs were more or less price elastic? Explain in words and graphically.

c. All SSB taxes are currently imposed by localities rather than at the state or federal level. Philadelphia has a unique version of the tax in that all sweetened beverages are taxed rather than just SSBs (meaning that diet sodas are also taxed). A recent study on the impact of Philadelphia’s tax by Seiler et al. (2020) found that the sales of taxed beverages decreased by 46% in response to the tax. However, the sales of these types of beverages in stores outside of Philadelphia increased so that the net reduction in sales of taxed beverages was only 22%. What does this suggest about the public health and revenue raising potential of a tax on SSBs (or in Philly’s case, a tax on sweetened beverages) for a locality if the tax is only in effect in a limited geographic area in comparison to state-wide or nationally? Explain in detail. Graphs are not required for this part of the problem, but you may use them if you would like.

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