Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 13, Problem 5SCQ
When residents in a neighborhood tidy it and keep it neat, there am a number of positive spillovers: higher property values, less crime, happier residents. What types of government policies can encourage neighborhoods to clean up?
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Difference-in-Difference
In the beginning of 2001, North Dakota legalized fireworks. Suppose you are interested in
studying the effect of the legalizing of fireworks on the number of house fires in North
Dakota. Unlike North Dakota, South Dakota did not legalize fireworks and continued to ban
them. You decide to use a Difference-in-difference (DID) Model. The numbers of house fires
in each state at the end of 2000 and 2001 are as follows:
Number of house fires in Number of house fires in
Year
North Dakota
2000
2001
35
50
South Dakota
54
64
a. What is the change in the outcome for the treatment group between 2000 and 2001?
Show your working for full credit. (10 points)
b. Can we interpret the change in the outcome for the treatment group between 2000
and 2001 as the causal effect of legalizing fireworks on number of house fires?
Explain your answer. (10 points)
C.
Regression Discontinuity
Birth weight is used as a common sign for a newborn's health. In the United States, if a baby
has a birthweight below 1500 grams, the newborn is classified as having “very low birth
weight". Suppose you want to study the effect of having very low birth weight on the number
of hospital visits made before the baby's first birthday. You decide to use Regression
Discontinuity to answer this question. The graph below shows the RD model:
Number of hospital visits made before baby's first birthday
5
1400
1450
1500
1550
1600
Birthweight (in grams)
a. What is the running variable? (5 points)
b. What is the cutoff? (5 points)
T
What is the discontinuity in the graph and how do you interpret it? (10 points)
Chapter 13 Solutions
Principles of Economics 2e
Ch. 13 - Do market demand curves reflect positive...Ch. 13 - Suppose that Sonys R. Is this a private or social...Ch. 13 - The Gizmo Company is planning to develop new...Ch. 13 - The Junkbuyers Company travels from home to home,...Ch. 13 - When residents in a neighborhood tidy it and keep...Ch. 13 - Education provides both private benefits to those...Ch. 13 - Which of the following goods or services are...Ch. 13 - Are the following goods non-rival in consumption?...Ch. 13 - In what ways (it) company investments in research...Ch. 13 - Will the demand for borrowing and investing in R&D...
Ch. 13 - Why might private markets tend to provide too few...Ch. 13 - What can government do to encourage the...Ch. 13 - What are the two key characteristics of public...Ch. 13 - Name two public goods and explain why they are...Ch. 13 - What is the free rider problem?Ch. 13 - Explain why the federal government funds national...Ch. 13 - Call a company be guaranteed all of the Social...Ch. 13 - Is it inevitable that government must become...Ch. 13 - How do public television stations, like PBS, try...Ch. 13 - Why is a football game on ESPN a quasi-public good...Ch. 13 - Provide two examples of goods/services that are...Ch. 13 - Radio stations, tornado sirens, light houses, and...Ch. 13 - HighFlyer Airlines wants to build new airplanes...Ch. 13 - Assume that the marginal private costs of a film...Ch. 13 - Becky and Sarah are sisters 1who share a room....
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