Reading 14: Efficiency and Equity-LOS f 习题精选 2011, efficiency, relation, discuss, between

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Session 4: Economics: Microeconomic Analysis
Reading 14: Efficiency and Equity

LOS f: Explain the two groups of ideas about the fairness principle (utilitarianism and the symmetry principle) and discuss the relation between fairness and efficiency.

 

 

A candidate for public office has proposed a program of wealth transfers based on the principles of utilitarianism. In support of her proposal, she makes the following statements:

Statement 1: “Increasing taxes on high income earners will cause them to work more hours to maintain their after-tax income, resulting in greater economic output.”

Statement 2: “The government will need to hire people to manage and administer the wealth transfers. These new jobs will further expand economic output.”

With respect to these statements:

A) both are incorrect.

B) only statement 1 is incorrect.

C) only statement 2 is incorrect.

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Both statements are incorrect. Increasing taxes on high income earners reduces their incentive to work, which results in less labor being supplied and lower economic output. The labor needed to administer wealth transfers must be diverted from other uses that provide value to consumers. This moves resources away from a productive use, which reduces economic output.

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Which of the following economic schools of thought suggests that the greatest good occurs to the greatest number of people when wealth is transferred from the rich to the poor?

A) Utilitarianism.

B) Utopianism.

C) Symmetry.

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Utilitarianism refers to the idea that the greatest good occurs to the greatest number of people when wealth is transferred from the rich to the poor in order to make everyone’s wealth equal.

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Which of the following most accurately reflects the concept that competitive markets allocate resources fairly as long as the same rules apply to all participants?

A) The fairness principle.

B) The symmetry principle.

C) Utilitarianism.

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The symmetry principle holds that people in similar situations should be treated similarly. It implies that the market allocates resources fairly if the rules of economic allocation are fair.

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The symmetry principle holds that:

A) people in similar situations should be treated similarly.

B) everyone has the same capacity to enjoy life.

C) the resources of the economy should be shared equally.

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The symmetry principle holds that people in similar situations should be treated similarly and that fairness requires equality of opportunity rather than equality of results. Individuals provide voluntary services in exchange for economic benefit and they get goods and services from the economy that are equal in value to their contributions to the economy.

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Which of the following is least likely consistent with utilitarianism?

A) A CEO and a common laborer should receive the same income.

B) Everyone wants and needs the same things.

C) The marginal benefit of a dollar is the same for both the poor and the rich.

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Proponents of utilitarianism argue that the marginal benefit of a dollar is greater for the poor than the rich, so the gain in marginal benefit to the poor from the transfer of wealth is greater than the loss of marginal benefit to the rich. All of the other statements are consistent with utilitarianism.

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Which of the following is least likely to be considered a drawback of utilitarianism?

A) Administrative fees associated with wealth transfers.

B) High income earners will work more.

C) Wealth transfer from the rich to the poor is expensive.

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The biggest problem with the utilitarian concept is that the wealth transfer from high income earners to low income earners is brought about by taxing the high income earners. This will cause the high income earners to work less.

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The symmetry principle refers to the idea that if an economy is organized under a fair set of rules:

A) output is maximized at the optimal balance between voluntary and involuntary contributions from individuals.

B) individuals receive goods and services equal in value to their economic contribution.

C) the greatest good is achieved for the greatest number of people.

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The symmetry principle asserts that under a fair set of rules, the goods and services that individuals receive from the economy will be equal in value to the contributions they make to the economy.