Questions and Answers of Economics Public Issues

How can the tools discussed in Chapters 1 through 3 help us understand some of the policy issues involved with GMOs?
Some U.S. policy is designed to subsidize exports and thus increase employment in export industries. What effect does such policy have on our imports of foreign goods and thus on employment in
When you go shopping for a new computer, is your real objective to “import” a computer into your apartment or is it to “export” cash from your wallet? What does this tell you about the true
Most U.S. imports and exports travel through our seaports at some point. How do you predict that members of Congress from coastal states would vote on proposals to restrict international trade? What
If it would be cheaper to give each steelworker $375,000 per year in cash than impose restrictions on imports of steel, why do we have the import restrictions rather than the cash payments?
What motivates politicians to impose trade restrictions?
Who gains and who loses from import restrictions?
Who bears the costs and enjoys the benefits of the subsidies mentioned in the previous question?
The U.S. government subsidizes the export of U.S. manufactured commercial aircraft. What effect do you think this policy has on American imports of foreign goods and American exports of products
Until recently, American cars exported to Japan had driver controls on the left side (as in the United States), even though Japanese cars sold in Japan have driver controls on the right side, because
For a number of years, Japanese carmakers voluntarily limited the number of cars they exported to the United States. What effect do you think this had on Japanese imports of American cars and on
Over the past twenty-five years, some Japanese automakers have opened plants in the United States so that they could produce (and sell) “Japanese” cars here. What effect do you think this had on
During the late 1980s and early 1990s, American automobile manufacturers greatly increased the quality of the cars they produced relative to the quality of the cars produced in other nations. What
In a wealthy country, wages are not only high in the traded-goods and services sector, but they are also high in the non-traded goods and services sector. Why? Are there two separate labor markets or
Why does McDonalds provide a six hundred-page manual to the company’s franchises in every country? What are the ways that any franchisor can monitor quality of its franchisees?
Is there anything that a Big Mac preparer in a developing country can do to earn a higher real wage rate?
If the same amount of materials and the same methods are used to produce Big Macs in over 120 countries, why are the prices of Big Macs not all the same, expressed in dollars?
Why don’t the local prices of restaurant meals, haircuts, and gardening services affect a country’s exchange rate?
Assume you are going to take a trip to Paris. You buy euros at your local bank or at the airport. Then you start spending them once you are in Paris. Every time you buy something there, you
The population concentrations of most counties in the United States tend to be located in the middle of each county. Where do you think most landfills are located within each county?
How does interstate trade in trash differ from interstate trade in other products?
A community planning on charging a fee for trash pickup might structure the fee in any of several ways. It might, for example, charge a fixed amount per can, an amount per pound of garbage, or a flat
How do hefty per-can garbage pickup fees influence the decisions people make about what goods they will consume?
Why do many communities mandate recycling? Is it possible to induce people to recycle more without requiring that all residents recycle?
How do deposits on bottles and cans affect the incentives of individuals to recycle these products?
Why are foreign producers of products so often the subject of special taxes such as the tax on imported ethanol?
The EPA has approved the use of up to 15 percent ethanol in fuel blends. Cars built before 2007 (especially those built before 2001) are at risk of considerable engine damage if they run on such
From 2004 through 2011, the federal subsidy on U.S. ethanol production was roughly 50 cents per gallon. Use the theory of rational ignorance to explain why the ethanol subsidy was only about 50 cents
Why do you suppose the federal government gives special treatment to owners of fertile farmland rather than, say, automobile mechanics?
Ethanol in the European Union (EU) is made from beets. In 2013 the EU imposed a tariff of about 25 cents per gallon on imports of ethanol from the United States. Explain who wins and who loses due to
Brazilian ethanol producers (who make ethanol from sugarcane) have lower production costs than U.S. producers. Until 2012, Congress protected U.S. producers from Brazilian competition by imposing an
Human-caused (anthropogenic) emissions of CO2 are only about 3 percent of total CO2 emissions each year. (Oceans are the biggest emitters.) Why is so much attention directed at anthropogenic
Suppose the United States decides to discourage CO2 emissions by imposing a tax on CO2 emissions. How large should the tax be?
It costs about $100,000 per acre to create wetlands. How reasonable is this number as an estimate of what wetlands are worth?
The policy approach to greenhouse gases will almost certainly involve limits on emissions rather than taxes on emissions. Can you suggest why limits rather than taxes are likely to be used?
Does the fact that the CO2 produced in one nation results in adverse effects on other nations have any bearing on the likelihood that CO2 emissions will be reduced to the optimal level? Would
Why will voluntary actions, undertaken at the individual level, be unlikely to bring about significant reductions in greenhouse gases such as CO2?
Although much credit is given to buffalo hunters for causing the near extinction of bison, there was another factor at work. Cattle are easily herded by men on horseback and readily contained by
Aquaculture is the business of raising water-dwelling animals, including fish, mollusks (such as oysters), and shell fish (such as shrimp) in enclosed areas. For fish, this means raising them in
In the United States, most fishing streams are public property, with access available to all. In Britain, most fishing streams are privately owned, with access restricted to those who are willing to
Is government ownership of animals needed to protect species from extinction?
Some people argue that the best way to save rare species is to set up private game reserves to which wealthy hunters can travel. How could this help save endangered species?
Has there ever been a problem with the extinction of dogs, cats, or cattle? Why not?
How does the promise of guaranteed Social Security and Medicare benefits affect an individual’s decision to save during the years before retirement age?
How would a change in immigration laws that allowed more legal immigration affect the budget crisis we face with Social Security and Medicare?
In general, people who are more productive earn higher incomes and thus pay higher taxes. How would a change in the immigration laws that favored more highly educated and skilled individuals affect
When the government taxes younger people to pay benefits to older people, how does this affect the size of the bequests that older people are likely to leave to their children or grandchildren when
When the government taxes younger people to pay benefits to older people, how does this affect the amount of assistance that younger people might voluntarily choose to offer older people?
How do the payroll taxes levied on the earnings of workers affect their decisions about how much leisure they consume?
Under the federal Duck Stamp program, waterfowl hunters pay a fee to the federal government each year, the proceeds from which are used to purchase land for waterfowl habitat. Do you think farmers
What are the likely environmental impacts of our farm programs? Explain.
Why do you suppose that farmers, rather than economists, receive subsidies from the federal government? If you are tempted to answer that there are more farmers than economists, ask yourself, what
What groups would be the major beneficiaries if farm subsidies in the United States were eliminated?
The costs of GMO-free foods are said to be higher because these foods must be isolated from GMO crops during both growing and processing. But GMO crops also enable food to be grown on much less land
Suppose that there are great benefits from transgenic crops, including improved nutrition, longer life spans, reduced infant mortality, and the like. But also assume that there are environmental
Suppose one accurately took into account all of the costs and benefits of developing transgenic crops. Could you be sure that the economically efficient path to follow would be to permit the
Why don’t drivers of conventional cars with internal-combustion engines care about whatever pollution they generate?
How do the potential (environmental and economic) costs of transgenic crops differ from most of the traditional costs associated with agriculture (such as tractors and labor)? Who bears the costs:
What are the benefits to consumers who purchase electric cars?
What are some of the arguments that you could use to justify the expansion of wind power and solar power?
Why does the federal government have to provide subsidies to entice private companies to build and maintain wind farms?
What do we mean when we say that industrial policy leads to inefficient use of resources?
Can you think of any situation in which the use of taxpayer dollars to subsidize industrial production of one type or another might benefit the nation in the long run?
Under what circumstances would an employer be willing to pay an annual fine for not providing legally required employee health insurance?
In Britain, everyone has the right to health care provided by the National Health Service, paid for out of tax revenues. Nevertheless, two-thirds of British citizens earning more than $80,000 per
People over the age of sixty-five are eligible for Medicare, which offers subsidized health care—as long as the doctor involved agrees to accept the relatively lower fees paid by Medicare. Some
When an employer chooses to reduce the hours worked by many of its employees to fewer than thirty per week, what might be some of the negative consequences to the business? What damages might the
Do increased physician and hospital treatments for serious illnesses among those who are newly insured tell you anything about the price elasticity of demand for medical care? If so, what?
Under what circumstances would you try to avoid purchasing health insurance?
Labor unions are a device for limiting competition, in this instance competition among workers. The union bargains on behalf of all members, presumably resulting in a higher wage for workers and
Although New York City’s mass transit system is the largest in the country, it is not the only one that is heavily subsidized by taxpayers— in fact, as far as we know, all mass transit systems
Manicurists and pedicurists are required to be licensed in both California and Florida. In California, people practicing these occupations must take 600 hours of classroom training; in Florida, they
Is there any difference between prohibiting entry by a group of firms and levying a special tax on those firms?
If it is so obvious that farm subsidies hurt consumers, why do such subsidies continue to be voted in by Congress?
American corn farmers receive billions of dollars in taxpayer subsidies each year. These subsidies allow them to sell their grain at prices below what it costs to produce it, particularly for export
GMO-free soybeans cost about $2 per bushel more than GMO soybeans. How many hours does someone have to work to pay that premium in the United States, where average wages are about $25 per hour? How
Although governments at all levels sometimes act to prevent some individuals from competing with others, the federal government is probably the most active in this role, state governments are less
Suppose a local beverage shop charges $6 for a six-pack of your favorite beverage and charges $15 for a case (containing four sixpacks) of that same beverage? Is this price discrimination?
Suppose a firm starts off with selling a uniform product to two different customers at the same price per unit for each. Now it decides to engage in price discrimination by raising the price to one
Consider the following data from three different firms (1, 2, and 3) each selling to two different customers (A and B). Shown are the price per unit charged each customer and the marginal cost of
What factors other than income are likely to affect willingness to pay? How will differences in these factors among its customers affect the likelihood that a firm will engage in price discrimination?
Is it price discrimination when a professional football team charges, say, $350 per ticket for fifty-yard-line tickets in the lower deck and $100 per ticket for upper-deck tickets overlooking the end
First-class passengers generally pay higher fares than coach passengers, even when they take advantage of advance-purchase discounts. Is this price discrimination? Seats in first class are generally
The economy of India (with a population of one billion) has begun to industrialize, and per capita income there is rising. What impact will this growth have on the demand for oil and diamonds—and
If the members of your class were to attempt to form a study-reduction cartel in which everyone agreed to study less, which individuals would have the most to gain from the cartel? Which ones would
What happens to the producers of caviar made from other types of fish eggs (such as salmon, whitefish, and trout) when the price of the finest sturgeon caviar changes? Would these firms ever have an
Would it be easier to form a cartel in a market with many producers or one with few producers?
Why are all cartels inherently unstable?
If there were a smaller number of Tier 1 network providers, how would this alter the likelihood that one or more of them might attempt to vertically foreclose some content providers? Would you expect
What is likely to happen to the political campaign contributions made by Tier 1 networks and other major Internet suppliers if the FCC is successful in getting the power to regulate Internet traffic
If government regulation of prices and services generally harms consumers (and the evidence is that it does), why do we see governments continue to engage in such behavior? That is, who might gain
Explain how an unscrupulous government might use the powers sought by the FCC to stifle Internet freedom. What will happen to the profits of the companies who are told that they must, in the
There are tens of thousands, perhaps hundreds of thousands, of traffic agreements among the 13,000 networks that comprise the Internet. How will the FCC be able to determine which of the many
What is a fair price for the amount of data you use on the Internet? Surely you would like to pay less for the same service and your Internet service provider would like you to pay more. Yet you both
How does a country’s tax structure affect who decides to immigrate into the nation or emigrate out of the nation? Contrast, for example, nations A and B. Assume that nation A applies a 20 percent
Suppose that federal marginal personal income tax rates will rise significantly over the next ten years. Explain the ways in which individuals at all levels of income can react over time, not just
Explain how the incentive effects of each of the following hypothetical taxes would cause people to change their behavior. Be sure to explain what people are likely to do less of and what they are
If you found yourself in the 91 percent federal personal income tax bracket in 1951, how great would have been your incentive to find legal loopholes to reduce your federal tax liabilities? If you
Consider three scenarios. In each, your neighbor offers to pay $500 if you will clear brush out of his backyard this week.Scenario 1: If you decline the offer, you can collect $200 in unemployment
Suppose the government spends more this year than it collects in taxes, borrowing the difference. Assuming that the government will repay its debts, what does this imply about what must happen to

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