ECON 1210: Inspection vs Experience Good - Report Writing - Economics Assignment Help

Assignment Task:

Task:

Questions
Part A. Inspection vs experience good

In Canada, individuals may choose to undergo elective surgery to have devices surgically implanted, to address health issues or other concerns. In many cases consumers pay for these services (i.e. they are not covered by Medicare).

In 2018, the CBC reported on a number of surgically implanted products that have been malfunctioning in patients’ bodies (ex. replacement hips, breast implants, birth control devices) and causing severe side effects (intense pain, links to cancer, mental illness, etc.). For more information see:
https://www.cbc.ca/news/health/implant-files-investigation-medical-devices-1.4924384
https://www.cbc.ca/news/health/breast-implants-marketing-marketplace-1.4926570
https://www.cbc.ca/news/health/medical-devices-implant-files-removal-1.4913807
https://www.cbc.ca/news/health/health-minister-responds-the-implant-files-1.4926186

1. Assume the market for medical implant services is perfectly competitive (all required assumptions hold) and that these findings of malfunction were all new discoveries for both consumers and producers of these services. Using a supply and demand diagram, illustrate the old and new equilibrium price and quantity (before and after the information was released).
2. In reality, are surgical implants an inspection good or an experience good (according to James Galbraith)? Explain (define both).
3. Assume now that producers did know about the defects but misled consumers. What assumption of the perfectly competitive market appears to be violated in this case? What type of problem does this cause?
4. How might government intervene to protect consumers of these products/services?
5. What impact would government intervention have on the profits of the suppliers of these services, assuming they are making an economic profit?
6. What unproductive steps might suppliers of these services take in response to maintain profits?

Part B Pollution:

7. In the textbook neoclassical model, is the optimal quantity of pollution generally greater than or equal to zero?
8. A 2018 report concluded that chronic exposure to air pollution from greenhouse- gas-emitting activities is killing an estimated 7,142 Canadians a year, and 2.1 million people worldwide. Draw a supply and demand graph for fossil fuel powered vehicles that reflects both the private and social costs and benefits of using these vehicles. Clearly label each curve, as well as the private market and socially optimal prices and quantities.
9. Describe and show on the graph how the government might intervene in the market for fossil fuel powered vehicles to achieve the socially optimal outcome.
10. Why might a government choose to tax the pollution instead of taxing the good itself?
11. What would be an alternative to taxing the pollution that could achieve an equivalent outcome?

Part C: Education
Suppose that more workers with a post secondary education (PSE) degree improves the overall productivity of all workers, including those without a PSE degree, but students are neoclassical utility maximizers such that they only take into consideration the private benefits to themselves when deciding whether to go to college or university.

12. Draw a supply and demand graph for PSE that reflects both the private and social costs and benefits of PSE. Clearly label all curves, as well as the private market and socially optimal tuition fees (prices) and quantities.
13. Describe in words and show on the graph how the government might intervene to change the demand for PSE to achieve a socially optimal outcome. Label the net tuition paid by students and the tuition received by universities/colleges.
14. Describe and show on the graph how the government might intervene to change the supply of PSE to achieve a socially optimal outcome. Label the revenue received by universities/colleges and the tuition paid by students.

Part D: Workplace Health and Safety
Each year there are worldwide approximately 1.9 to 2.3 million deaths per year related to occupation/work.

15. How does the textbook neoclassical model (with perfect competition) explain the fact that workers undertake unsafe work?
16. What assumption of the neoclassical model may be violated when it comes to workplace health and safety and workers engaging in dangerous work?
17. How might structuring a firm as a worker cooperative affect the degree to which workers participate in unsafe work? Explain.

Part E: Luxury/Conspicuous consumption:
Assume that the only value of having a perfect front yard/lawn over one filled with wild plants is its benefit as a positional good (i.e. it is a status good – shows you’re “high class”). It costs $1,500 per year to keep your yard/lawn in perfect condition (watering, fertilizer, chemicals to kill weeds, labour, etc.). Wild yards have no maintenance costs.  If you are ”high class” and your neighbour isn’t, you get a positional “utility” benefit that you value at $6,000 (from feeling better about yourself, being more popular, etc.). If your neighbour has a perfect yard/lawn and you don’t, you feel “low class” and experience reduction of utility of -$4,000. The following payoff matrix summarizes this scenario:

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