ufp_exam1_12_sol

By assumption philip ignores the benefits that hannah

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Unformatted text preview: By assumption, Philip ignores the benefits that Hannah reaps from his generosity. Hence the equilibrium cannot satisfy the Samuelson condition. Hannah is free-riding on Philip’s generosity. Problem 3 1. Under the new law, the set of people without ID’s are mostly affected. The key issue is then the following: Who is unlikely to have a valid ID? Since the driver’s license serves as the main form of ID in the U.S., we conclude that these are individuals who do not have a valid driver’s license. These are largely people who are either too poor to afford a car or too old to drive. In addition, there are those people who never learnt how to drive car. 2. The law would change the set of voters. If the new law takes effect, the new median voter is likely to be younger and have higher income. There are also less women voting since a large number of women don’t have driver’s licenses. These types of individuals are more likely to vote for Democrats than Republicans if they were allowed to vote. Hence, the Republican Party is likely to gain from the law. 4...
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