Question: 1. The average weight of American adults increased by about 10 pounds in the 1990s. In November 2…

02 May Question: 1. The average weight of American adults increased by about 10 pounds in the 1990s. In November 2…

Posted at 08:35h in 2Past Paper by Exams

1. The average weight of American adults increased by about 10 pounds in the 1990s. In November 2004, it was reported that U.S. airlines spent $275 million more in fuel costs to transport this additional weight. a. If airlines must spread out the cost of transporting obese people over all passengers, including those who are slim, would this increased cost be an externality of obesity? Assume that obesity does impose a negative externality and the main cause is high sugar intake, use a demand and supply model to illustrate the market outcome and the socially optimal outcome. Consider three policy options: 1) a sugar consumption tax, 2) a regulation requiring restaurants to display calories on their menus, and 3) Banning soda and junk foods from public school cafeterias, illustrate the effect of each policy with a demand and supply model. Discuss the efficiency and equity implications for each policy b. c.

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