Political Economy Assume there are three voters: A, B and C. Voter preferences can be ranked along a left-to-right spectrum that ranges from 1-9; 1 being the most left leaning preference and 9 being the most right leaning preference. Suppose these voters will choose between candidates Smith and Jones in an upcoming election. Voter IdPreference(1-9)A4B5C6 True/False Explain: If the median voter theorem holds, candidates Smith and Jones will either both adopt preference 5 OR one will adopt preference 4 while the other adopts preference 6. Suppose the electorate becomes more polarized; A moves from 4 to 1 while C moves from 6 to 9. B remains at 5. How does the median voter model predict candidates Smith and Jones will change their preference?Keeping the assumptions from B, how does the election result change if a tax on non-voters doubles the number of voters while preserving the distribution of preferences?If the tax in C induces 100% compliance (everyone votes), did this tax increase total surplus, decrease total surplus or have no effect on total surplus?Wealth Taxes/Mankiw, Saez and Summers Suppose people can consume the income they earn or save and invest it at rate ?. If we tax wealth at a rate greater than ?, how are people likely to adjust their rate of savings?Use the Solow model to comment on how a wealth tax will likely affect the growth rate of the capital stock. How will this policy affect the growth rate of output per worker? How will this policy affect the wage rate for workers?To what extent is this wealth tax likely to reduce the influence of the wealthy in politics? D. In the Peterson Institute discussion, Greg Mankiw argues that accumulating wealth creates a pecuniary externality. What does Mankiw mean? How would you expect a wealth subsidy to affect the real wage for workers?

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Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 7PA

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Political Economy Assume there are three voters: A, B and C. Voter preferences can be ranked along a left-to-right spectrum that ranges from 1-9; 1 being the most left leaning preference and 9 being the most right leaning preference. Suppose these voters will choose between candidates Smith and Jones in an upcoming election.

Voter Id	Preference(1-9)
A	4
B	5
C	6

True/False Explain: If the median voter theorem holds, candidates Smith and Jones will either both adopt preference 5 OR one will adopt preference 4 while the other adopts preference 6.

Suppose the electorate becomes more polarized; A moves from 4 to 1 while C moves from 6 to 9. B remains at 5. How does the median voter model predict candidates Smith and Jones will change their preference?
Keeping the assumptions from B, how does the election result change if a tax on non-voters doubles the number of voters while preserving the distribution of preferences?
If the tax in C induces 100% compliance (everyone votes), did this tax increase total surplus, decrease total surplus or have no effect on total surplus?
Wealth Taxes/Mankiw, Saez and Summers

Suppose people can consume the income they earn or save and invest it at rate ?.

If we tax wealth at a rate greater than ?, how are people likely to adjust their rate of savings?
Use the Solow model to comment on how a wealth tax will likely affect the growth rate of the capital stock. How will this policy affect the growth rate of output per worker? How will this policy affect the wage rate for workers?
To what extent is this wealth tax likely to reduce the influence of the wealthy in politics?

D. In the Peterson Institute discussion, Greg Mankiw argues that accumulating wealth creates a pecuniary externality. What does Mankiw mean? How would you expect a wealth subsidy to affect the real wage for workers?

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