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EXAMPLE OF A DOMESTIC POLICY ANALYSIS FOR FINAL EXAM1 1. This analysis addresses the following question: “Do subsidies to sugar producers increase society’s happiness?” A. What kind of government intervention would this represent (choose from Subsidy, Tax, Quota, Mandate)? ________________________________________ B. Fill in the Profit Table below to illustrate the effect of this government intervention on society’s happiness. Before Intervention After Intervention BENEFIT: -------------------------------------------------------------------------------------------REVENUE: COST: _____________________________________________________________ PROFIT: C. The Profit Table above shows the Revenues, Costs, and Profits for what kind of firm? D. Who are the winners from the resource transfer represented on the Revenue line of the Profit Table above? Briefly elaborate why they are “winners.” E. Who are the losers from the resource transfer represented on the Cost line of the Profit Table above? Briefly elaborate why they are “losers.” 1 Additional copies of this handout can be downloaded from the website: “http://faculty-staff.ou.edu/R/William.R.Reed-1/Courses/ECON_5612/index.html” . *F. Briefly describe the externality that, in your opinion, provides the best justification for government intervention in this market. *G. Identify the group of consumers who constitute the “third party” affected by this resource transfer. H. Looking only at the resource transfer represented in the Profit Table above, and using the numbers you came up with, what is the net impact on society’s happiness of the government intervention for this resource transfer? In other words, by what dollar amount does the intervention change society’s happiness? (Write your numerical answer on the line below. Be sure to indicate whether the intervention would increase or decrease society’s happiness by including a “+” or “ –“ with your numerical answer.) The net change in society’s happiness = _________________ I. Answer the following question: “Do subsidies to sugar producers increase society’s happiness?” Circle the answer below that represents what you really think. YES J. NO In the space below, elaborate on why you are in favor or against this government intervention. Your task here is to present a thoughtful defense of your opinion, whatever it may be.