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Questions and Answers of
Economics Public Issues
Consider two different ways of beating your competition. One way is to offer your customers lower prices and better service. The other is to get a law passed that raises your competitors’
Even without a minimum wage, the unemployment rate would almost surely be higher among teenagers than among adults. Suggest at least two reasons why this is so.
Is it possible that a higher minimum wage could ever increase employment?
Refer back to the last question. Based on the discussion in the chapter, what would you want to know about these women to satisfy yourself that they will be at least as productive as the men? List
Are teenagers better off when a higher minimum wage enables some to earn higher wages but causes others to lose their jobs?
Why do you think organized labor groups, such as unions, are supporters of a higher minimum wage, even though all of their members earn much more than the minimum wage?
Are there methods other than a higher minimum wage that could raise the incomes of low-wage workers without reducing employment among minority youngsters?
Women who own their own businesses earn net profits that are only half as large as the net profits earned by men who own their own businesses. First, consider why women would be willing to accept
Why do you think we have laws that prohibit discrimination in pay based on gender or race but permit employers to discriminate in pay based on education or experience?
A recent British study found that married men earned more than unmarried men, but only if their wives did not have full-time paid employment. Suggest an explanation for this finding. In which case is
Suppose an employer offers a base wage of $20 per hour for the first forty hours of work each week and overtime pay of $30 per hour for any hours beyond forty per week; the employer allows workers to
Piketty proposes higher income and wealth taxes on the wealthy. Given that one’s wealth generally depends primarily on how much output one produces, how do these taxes affect the incentives of
If you play poker with a group of friends, you are playing what is called a zero-sum game. What you win, they lose and vice versa. The sum of the funds that you start with together does not change.
Today, usually at little cost, you can Skype your friends and family, no matter where they are located. Are you both psychologically and economically richer? Why or why not? Similarly, you can
In 1984, individual balances in private retirement plans were $865 billion. Twenty-five years later, they rose to almost $13 trillion. In general, balances in private retirement plans are not
When the capital gains tax rate was reduced from 28 to 20 percent in 1997 and especially when it was cut again to 15 percent in 2003, many people believed that these reductions would be temporary.
During Prohibition, some speakeasy operators paid bribes to ensure that the police did not raid them. Would you expect the quality of the liquor served in such speakeasies to be higher or lower than
Referring back to the last question, raves and education are both goods. That is, people typically prefer more of each to less. Do you think it is proper that people may not hold raves in the room
Why is it teenagers (rather than members of any other age group) who are most likely to lose their jobs (or get turned down for employment) when the minimum wage is raised?
Does envy of those who are rich depend on the source of that wealth? For example, consider two people who are both equally rich. One of them worked eighty hours a week year after year to accumulate
Referring back to the facts of the previous question: Suppose you knew that in one community water is supplied by a privately owned company, while in the other community water is supplied by the
Consider two otherwise identical communities; call them P and N. Suppose that in P, all homes, apartments, and businesses have meters that record the usage of water. In addition, the users of the
If allocating water through nonprice means generally harms society, can you suggest why governments often do this?
During the droughts that periodically plague California, farmers in that state are able to purchase subsidized water to irrigate their crops, at the same time many California homeowners have to pay
Evaluate the following: “Although taxpayers foot the bill for federal water sold to farmers at subsidized prices, they also eat the crops grown with that water. Because the crops are cheaper due to
How much water do people “need”? Is your answer the same if you have to pay their water bills?
The United States currently has an “opt-in” system for organ donations from the deceased: People must explicitly choose postmortem donation ahead of time (as when they obtain their driver’s
The average waiting time on transplant lists is 4.5 years for kidneys (although this is expected to rise sharply due to the rising incidence of diabetes, a major cause of kidney damage). Many of
If payment for organs drives up the financial costs of transplants, is it possible that private insurance companies, and even Medicare and Medicaid, might tighten their standards for transplants so
Why might the owners of the private insurance companies that pay for most organ transplants be in favor of a system that prohibits paying for a donated organ? Should the taxpayers of the United
Per capita income varies substantially across the country. If there was a free market in which payments for kidneys was permitted within the United States, would you expect there to be different
For the purposes of this question, assume that allowing payment for kidney donations would cause us to spend another $3.5 billion on kidney transplants. (This is slightly above the estimate provided
Russia now supplies virtually all of the natural gas used by the citizens of many European nations, and sales of natural gas and other fossil fuels account for fully 10 percent of the national income
If national governments in other nations agreed to share the profits from fracking with the landowners on whose property the drilling takes place, how might that change attitudes toward the process?
Pennsylvania and New York are adjacent states that both have large amounts of natural gas-rich shale underground. Coal mining has a long and important history in Pennsylvania, in contrast to New
Natural gas produced by fracking is a substitute for some goods, i.e., the demand for these other goods falls when the price of natural gas falls. Nevertheless, natural gas is also a complement for
So far, most government regulations dealing with fracking are written and enforced by state and local governments, rather than the federal government. What are the advantages and disadvantages of
If the property rights to food belonged not to the landowner where the food was grown, but instead belonged to the national government, how might this affect the willingness of people to let
According to the Surgeon General of the United States, nicotine is the most addictive drug known to humanity, and cigarette smoking kills perhaps 300,000–400,000 people per year in the United
The markets for prostitution in Nevada and New Jersey have two important differences: (i) prostitutes in New Jersey face higher costs because of government efforts to prosecute them and (ii)
The federal government currently taxes alcohol on the basis of the 100-proof gallon. (Alcohol that is 100 proof is 50 percent pure ethyl alcohol; most hard liquor sold is 80 proof, or 40 percent
In recent years, about twenty states have passed so-called medical marijuana laws. Typically, these laws permit individuals to lawfully purchase marijuana from licensed stores, provided they have a
From an economic perspective, is it possible for laws restricting dangerous or destructive activity to be too strict? Explain.
Consider a highway with a hot lane and a lane that has no toll. Assume that the toll must be paid by all cars that use the hot lane, no matter how many people are riding in them. What can you predict
Suppose a suburb is connected to a central business district by a single two-lane road. One of these lanes has a toll of $5 for the trip, while the other lane has no toll. If everyone’s time is
Assume that by paying a $5 toll to use a hot lane, you could save six minutes on your commute to work, time that could be used productively in your office. What would your hourly wage rate (or
Suppose that when you ate a pizza you only had to pay for the crust but not the toppings. What would happen to (i) the number of pizzas you ate, and (ii) the amount and quality of the toppings on
If the purpose of a toll is to bring the private costs of a driver’s actions into equality with the total costs (including congestion), should the size of the toll depend on how many passengers are
Rather than tolls, some localities use other means to reduce congestion on major routes, for example with access-limiting traffic lights at freeway on-ramps. From an economist’s perspective, what
Almost all privately owned resources are closed access. Many (perhaps most) government-owned or controlled resources are open access. Can you suggest any explanations for this observation? Explain.
It is generally acknowledged that more people would like to attend the Super Bowl each year than in fact attend. (Presumably, many people stay away due to the high cost of the tickets, which are
Some nominally closed resources are effectively open access. For example, to gain entry to Yellowstone National Park by automobile one must pay a fee of $25. But during the popular summer months, at
Explain the sense in which your classroom is an example of a closed access resource. Explain what would happen to the quality of your education if access to the room were open—in the sense that
Is access to the house or apartment in which you live open or closed? If it is currently a closed access resource, how would the house likely be treated differently if it were converted to an open
If the crucial factor determining a country’s low standard of living is the adverse set of legal and cultural institutions it possesses, can you offer suggestions for how the other nations of the
In light of your answer to question 4, how do you explain that in some countries there is widespread political support for government policies that expropriate resources from some groups for the
Consider two countries, A and B, that have identical physical endowments of a key natural resource. In country A, any profits made from extracting that resource are subject to confiscation by the
Both Louisiana and Quebec have systems of local law (state and provincial, respectively) that are heavily influenced by their common French heritage, which includes civil law. What do you predict is
Most international attempts to aid people living in low-income nations have come in one of two forms: (i) Gifts of consumer goods (such as food) and. (ii) Assistance in constructing or obtaining
Go to a source, such as the CIA World Factbook or the World Bank, and collect per capita income and population data for each of the nations listed in Table 4–1. Compare the average per capita
Professional football teams sometimes charter airplanes to take them to their away games. Would you feel safer on a United Airlines plane that had been chartered by the Washington Redskins than on a
Many economists would argue that private companies are likely to be more efficient than the government at operating airlines. Yet many economists would also argue that there is a valid reason for
Many automobile manufacturers routinely advertise the safety of their cars, yet airlines generally do not mention safety in their advertising. Can you suggest an explanation for this difference?
Is safety likely to be a “normal” good (i.e., something people want to consume more of as they get richer)? Use your answer to this question to predict likely safety records of airlines based in
Suppose it is possible to observe (or measure) four attributes of airlines:(i) The size of their planes (measured in passenger-carrying capacity).(ii) The experience levels of their pilots.(iii) The
Is it possible to be too safe? Explain what you mean by “too safe.”
Suppose you are about to start an innovative, high-tech company in one of two states. You expect before-tax profits to be about $100,000 per year. Both states have similar living conditions, climate,
Why does it matter to you if the long-run economic growth rate falls from its historical 2.1 percent to, say, only 0.9 percent? How does your answer differ depending on whether you are looking ahead
Are those resources that are spent on R&D but do not yield profitable innovations wasted? Why or why not?
Why is it true that inventions are “a dime a dozen”?
If you had the choice of living today or one hundred years ago, which would you prefer and why? What about the choice between now and one hundred years in the future?
Suppose, for simplicity, that Type I and Type II errors resulted in deaths only. Keeping in mind that too little caution produces Type I errors and too much caution produces Type II errors, what
What would be the advantages and disadvantages of a regulatory system in which, rather than having the FDA permit or prohibit new drugs, the FDA merely published its opinions about the safety and
How could the incentives facing the people at the FDA be changed to reduce the incidence of Type II errors?
Does the structure of the drug industry have any bearing on the types of errors that drug firms are likely to make? That is, would a drug industry made up of numerous highly competitive firms be more
Why don’t the employees at the FDA accurately balance the marginal benefits to drug consumers against the marginal costs to those consumers?
Why don’t individuals simply force the FDA to do what is best for consumers of prescription drugs?
Why do the owners of rental units reduce their maintenance expenditures on the units when rent controls are imposed? Does their decision have anything to do with whether they can afford those
Who, other than the owners of rental units, loses as a result of rent controls? Who gains from rent controls? What effect would the imposition of rent controls have on the market price of an existing
How does the percentage of voters who are renters (as opposed to owners) affect the incentives for politicians to propose rent controls? Does this incentive depend on the likelihood that renters are
Because rent controls reduce the rental price below the market clearing price, the quantity of rental units on the market must decline. What does this imply must happen to the full cost of renting an
Why do you think governments frequently attempt to control apartment rents but not house prices?
What determines the size of the key-money payments that landlords demand (and tenants offer) for the right to rent a controlled apartment?
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