Which Potential Target Group for Welfare Benefits Would Best Satisfy

question 1

Multiple Choice

Which potential target group for welfare benefits would best satisfy the two characteristics of a good targeting mechanism?

• A) single mothers
• B) people who have a missing leg
• C) people earning less than $8 per hour
• D) people without health insurance

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Definitions:

Socially Optimal Level

The point of balance where the social benefits of an economic activity equal its social costs, maximizing overall welfare.

Perfectly Price Discriminate

A pricing strategy where a seller charges the maximum price that each individual consumer is willing to pay, thus capturing all possible consumer surplus.

Deadweight Losses

Economic inefficiencies that occur when the allocation of resources is not optimal, resulting from distortions in the market such as taxes, subsidies, or monopolies.

Perfect Price Discrimination

A pricing strategy where a seller charges the maximum possible price for each unit consumed that each buyer is willing to pay, thus capturing the entire consumer surplus as profit.