Econ 450 Summer 2014 Final - Econ 450 Summer 2014 Final 1 TRUE OR FALSE Justify(briey your answer 5 points each(a Claim Conditional on means-testing a

Econ 450 Summer 2014 Final - Econ 450 Summer 2014 Final 1...

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Econ 450 Summer 2014 Final 1. TRUE OR FALSE. Justify (briefly) your answer. 5 points each. (a) Claim : Conditional on means-testing a redistributive program, there is no advantage to further imposing categorical eligibility restrictions. (b) Claim : Social security is inefficient because it provides an an- nuity. Welfare would be improved if it paid out a lump-sum at retirement and allowed individuals to purchase annuities on their own in the private market. (c) Claim : Relative to a PPO (preferred provider organization), an HMO (health maintenance organization) suffers from less moral hazard in the provision of health care, and has lower costs. (d) Claim : If there is no Pareto-improving redistribution possible, then the current income allocation maximizes a a simple utilitar- ian welfare function. (e) Claim : If there are positive externalities in the consumption of health care services, then the moral hazard arising from the third- party payments system are not as severe as they might seem. (f) The first welfare theorem states that under certain conditions, the outcome of the private market is Pareto-efficient. Claim : This proves that government provision of vouchers for housing or education reduce social welfare.
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