ECONOMICS
105
SUPPLEMENTARY
01. In Pasour's article "Comparing Farm and Non-Farm
Incomes":
a.
What problems are encountered when comparing average farm income to average
non-farm income?
b.
When all factors are taken into account what can you say about the above
comparison?
02. In Pasour's
article "Effects of Agricultural Commodity
Programs":
a. Who are
the short-run beneficiaries of farm programs? Explain.
b. What
are the long-run consequences of using price supports? How do these compare to
the short-run effect? Explain.
c. What
are the indirect consequences of price support programs? Explain.
03. In Laura Sayre’s article
“Farming Without Subsidies: Lessons from New Zealand”:
a. When
New Zealanders decided on general reforms in 1984 how was the farm sector
affected during the transition period of about 6 years?
b. What
are some of the bad effects of farm subsidies?
c. In the
section “Life Without Subsidies” compare the following
categories before and after subsidies were removed: (1) rural populations and
employment, (2) agricultural productivity and (3) proportion of agriculture’s
contribution to GDP.
d. In the
section “Post-subsidy in
04. In Jayne Thomisee’s
article “The Cotton Debate”:
a. Why is cotton so important a crop for many poor Third World
countries such as
b. Why has the price of cotton been falling between 2001 and 2002?
c. What has been happening to the production of cotton in the
d. Why do
e. If US subsidies to
cotton were eliminated what effect would this have on world prices? (Hint: Most
likely estimates are from World Bank and UN FAO.)
f. What is one of the major causes of the decline in rural
communities? Explain.
05. In Daniel Griswold,
Stephen Slivinski, and Christopher Preble’s article “6 Reasons to Kill Farm Subsidies and
Trade Barriers”:
a.
Why are consumer prices higher because of farm subsidies? What products are
most affected? Who is hurt the most by these higher prices?
b.
How would producers who export to the rest of the world and domestic
manufacturers who use agricultural products as inputs benefit from abolishing
farm subsidies?
c.
Where does all the tax money go? Is this a worthwhile use of tax-payers money?
d.
In what ways will abolishing farm subsidies be environmentally friendly?
e. Why would agricultural reforms result in larger markets for
farmers and more economic diversity for rural
f.
How do our farm and trade policies make poverty abroad worse and the world a
less hospitable place? (Cotton is a good example here.)
06. In the article
"How Brazil subsidizes the Destruction of the Amazon":
a. Explain why the
following reforms will reduce the destruction of the Amazon:
(1)
Reduction of inflation (Hint: Look at the supply and demand for land in the
Amazon.)
(2) Phase out tax exempt status of
agriculture
(3)
Reducing land taxes so that owners of unimproved and improved land pay the same
taxes
(4)
Elimination of tax credits for ranching and cultivation in the Amazon (Hint: A
tax credit of 20% on investments in the Amazon means that a $1 million dollar
investment costs only $800,000 because 20% of the investment is used to
decrease taxes by $200,000. Look at the supply and demand for land in the
Amazon.)
(5)
07. In Zimmerman's article "New York's War Against the Vans":
a. Why is the MTA conducting a "war"
against the vans?
b. Van
drivers get paid significantly less than MTA drivers. Explain what effect this
has on the supply of van services versus the supply of MTA services.
08. In Taranto's article "Breaking Mr.
Maynard":
a. Why did
Mr. Maynard's competitors object to his new invention? How did they reduce the
ability of Mr. Maynard to compete with them?
b. Does use of the Egg King pose a health
threat?
c. Does the rent-seeking argument apply here?
09. In Howard Baetjer's
article "Beauty and the Beast":
a. What
evidence does Baetjer cite to show that the license
regulations are not directly concerned with the safety and health of the
customer? What is the purpose of the regulations?
b. Who
usually performs hairdressing illegally? Who usually complains about illegal
hairdressing? Explain.
c. What
effect does licensing have on voluntary transactions in the licensed
occupation? Explain.
d. What
segment of the population is most negatively affected by licensing laws?
Explain.
10. In Edward Lopez's article "Breaking Up Antitrust":
a. Do
those in charge of enforcing the antitrust statutes have the proper incentives
to seek out the greatest monopoly inefficiencies and prosecute them? (Look at
the incentives facing lawyers in DOJ and FTC. Ideally, such prosecutions should
produce the greatest net benefits to society.)
b. What
incentives do politicians in Congress have to properly enforce the antitrust
statutes? Explain.
c. Why was
the original anti-monopoly statute (the Sherman Antitrust Act) passed? Explain.
11. In Donald Boudreaux's
article "Predatory Pricing Laws: Hazardous to Consumers' Health":
a. What is
predatory pricing and was the Wal-Mart in
b. Why is "predatory pricing" not a
problem? Explain.
c. Why are
laws which are designed to prevent "predatory pricing" dangerous? How
do we distinguish between firms which are competing and those which are
engaging in "predatory pricing"? Explain.
12. In Stan Liebowitz and Stephen Margolis' article "Microsoft,
Monopoly, and Consumer Harm":
a.
What is the trend in the prices of word processing software and spreadsheet
software since 1986? How do Liebowitz and Margolis
interpret this evidence? Explain.
b.
Liebowitz and Margolis group software prices into
three groups over the 1988-95 period. What results
emerged from this grouping? Explain.
c.
The structuralist view of monopoly suggests that
higher prices will occur in markets where a firm has a larger market share. Is
this true in the PC/MacIntosh comparison? Explain.
d. Is
Microsoft a monopolist? A price-searcher?
13. In Barry Fagin's article
"The Case Against the Case Against
Microsoft":
a.
What evidence does Fagin give to contradict the view that Microsoft is a
monopolist as the DOJ alleges? (Hint: What actions did Microsoft take when
challenged by competitors? What does the pricing evidence indicate?)
b.
As long as ISPs and ICPs voluntarily agree to accept Microsoft's IE in return
for appearing in Windows' Internet connection, is there any restraint of trade
here?
c.
If consumers do not like the Windows' arrangement in part b., what can other
entrepreneurs do about it? Are there legal entry
barriers to prevent such actions? Explain.
d.
If there is no case of consumer harm, why has Microsoft been sued in court for
violating the antitrust laws? Has Microsoft's business practices harmed
competitors? Explain. (Hint: Are the antitrust laws used to protect consumers
or competitors?)
14. In Burton Folsom's
article "Herbert Dow and Predatory Pricing":
a.
What rules did the German cartel for their members when selling bromine? How
did they threaten competitors?
b.
Did Dow abide by the cartel's rules? What happened when he challenged the
cartel?
c.
What is predatory pricing and how did Dow spoil the German cartel's use of that
strategy? Explain.
d.
Did Dow need the protection of the
EXAM
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