1. Suppose government increase spending for Social Security pensions.

Explain why the

increased government spending for will not appreciably increase government purchases
of productive resources or the products of business firms.
Social Security pensions are government transfers. Except for a small amount of
purchases for personnel and other resources to administer the transfer no government
purchases are required. It will not increase the government purchases of productive
resources because there’s a separate fund allocated for different government activities.
2. List four government services and the benefits they provide to you and your family. Try
to put a monetary value on these benefits by thinking about what you would be willing
to give up to receive them if they were not available.
 Education (Free tuition)
The government offered free tuition for college students and this is a very big
help for me and my family. If there’s no free tuition my parents would pay Php
5,000 per semester for my college tuition instead of using it to pay bills.
 Health Services (Health center, Philhealth)
If one of our family member get sick and need for a check-up which cost up to
Php800 but since there’s a free check-up in the municipality health center we
prefer to go there to save some money.
Philhealth is a government-owned organization that sustain the health insurance
and for affordable health care services for all Filipinos. So for example if one of
family hospitalized because of hypertension then for hospital bills Php 9,000 will
be deducted for the payment.
 Cash Assistance (Social Amelioration Program)
This is given by the government to sustain the needs of the people when it
comes to calamity especially in this time of pandemic. The government gives Php
5,000 - 8,000 cash assistance and it is a big help instead of spending money to
buy groceries and pay bills since many people doesn’t have any work to sustain
basic needs.

Activity 2
 1. The marginal social benefit of college enrollments currently exceeds its marginal social
cost. Use a graph to demonstrate the gain in efficiency that would result from an
increase in college enrollment.

Since there’s an increase change in college enrollments and the total cost for the
production of this service must be efficient to achieve its goal. Marginal Social Benefit at P1
exceeds the P2 which is the marginal social cost, through these changes it leads to the
decrease in college enrollment. This leads to inefficiency decrease in college enrollment.
This leads to inefficiency since the MSC and MSB is not equal. To have

Activity 3
1. Explain why externalities prevent the attainment of efficiency when goods are traded in
competitive markets.
Externalities either positive or negative will result cost or benefit which can lead to a
serious problem which is market failure cause of market efficiency. Externalities prevent
attainment of efficiency because it causes overproduction or underproduction of goods.
Overproduction occurs due to negative externalities, the price of good sold to the consumer
doesn’t cover the cost in producing the products. While the underproduction occurs due to
positive externalities where the production of this product is less that’s why in this case if
there’s a subsidy the producers would supply efficient quantity.
2. Suppose a positive externality is associated with college enrollment. Assume that college
instruction is sold in a competitive market and that the marginal social cost of providing it
increases with enrollment. Show how a corrective subsidy to college students will increase the
market price of instruction. Show the net gain in well-being possible from the subsidy and the
amount of tax revenue required to finance its costs on your graph.

If the government provide enough subsidy to college students there will be an increase
or change in equilibrium because the government provide more subsidy, P1/ cost of college
instruction increase and the cost paid by students decreased to P2. In the Q1 shows that the
quantity of students who enrolled increase. The part being shaded shown amount of tax
revenue required to finance the cost of subsidy needed.

Activity 4
1. Give some examples of goods sold by governments in markets. Also, think of examples of
partially public goods produced and distributed by private firms for profit.
Example of a public goods that the government provide is the national defense and rule
of law where everyone here in our country will benefit from it. It is made available to all
people since we are paying taxes in order to benefit in these kinds of goods which is
necessary in our life. No one must worry about the supply of these goods because even
someone consume the amount is still the same and it is still available to others. For
example in the national defense, if they protect our country from invasion everyone will
benefit. Example of a public good sold in private firms for profit is a clean drinking water, it
is a public good because it is our natural resources and everyone can make use of it but
private firms used it to gain profit by producing a clean drinking water and those who will
pay for it will benefit from this product.
2. Education can be defined as a private good, even when supplied by government. Explain
what attributes of education make education definable as a private good.
Education is a private good even though it is supplied by government because when you
say public good it must be nonrivalrous which means when someone make use of it doesn’t
affect other people or nonexcludable which someone cannot be excluded from using that
good and in the case of education not all people especially disabled children who were
commonly excluded have the privilege for education even though it is provided by the
government. A lot of people wanted to have free education but public schools and
education is not enough especially that not all schools participate in voucher system of the
government.