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Economics: Instruments and Trade-offs in Government Policies

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Economics: Instruments and Trade-offs in Government Policies

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Questions and Answers

According to the passage, what is one of the key tradeoffs governments face when choosing regulations?

Efficiency and equity (correct)

Unemployment and wage inequality

Wage income and policy implementation

Strategic value and asymmetric information

What does the passage suggest is a key challenge in constructing a preference order between different policy outcomes?

Incomplete knowledge of reality and imperfect command of policy implementation

Defining the unemployment rate, average wage income, and inequality measures (correct)

Assessing the strategic value of information held by operators

Determining the social cost and social benefit of each policy

In the case presented, what is the tradeoff between the two competing policies for reducing unemployment?

One increases efficiency, the other increases equity

One has better policy implementation, the other has more complete knowledge of reality

One has higher social cost, the other has higher social benefit

One lowers average wage income, the other increases wage inequality (correct)

What is the key challenge the regulator in the telecommunications sector faces, according to the passage?

Obtaining accurate information from the operators they regulate Signup and view all the answers

What is the main purpose of the passage?

To provide an overview of the factors involved in choosing between different policy options Signup and view all the answers

Which of the following best describes the relationship between the government and the operators in the telecommunications sector, as presented in the passage?

Asymmetric, with the operators holding strategic information that the government regulator lacks Signup and view all the answers

What is the primary focus of the two competing policies mentioned in the passage?

Reducing the unemployment rate Signup and view all the answers

According to the passage, what is the main challenge in assessing the social cost and social benefit of the two competing policies?

Defining a preference order between the unemployment rate, average wage income, and wage inequality Signup and view all the answers

What is the main factor that complicates the decision-making process for the regulator in the telecommunications sector?

The asymmetric information held by the operators that the regulator is responsible for controlling Signup and view all the answers

What is the primary implication of the asymmetric information between the regulator and the operators in the telecommunications sector?

The regulator is at a strategic disadvantage in their interactions with the operators they are responsible for controlling Signup and view all the answers