Please edit and add more to these answers. 1. 21. What is meant when we economists say that…

Please edit and add more to these answers.

1.     21.  What is meant when we economists say that industrial policy leads to inefficient use of resources? We mean that either (i) the total benefits generated are less than the total costs, or (ii) that the marginal benefits differ from the marginal costs. Often we mean both.

22.  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 U.S. where average wages are about $25 per hour?  How many hours does someone have to work to pay the premium in those African countries where average wages are about $.25 per hours?  Are attitudes toward GMO-free crops likely to be different in Africa and the United States? At $25/hour and an added cost of $2.00 -bushel, a person must work for 2/25 = 0.08 hours = 4.8 minutes to afford the added cost of a bushel of GMO-free soybeans.

At a wage of $0.25/hour, a person would have to work for 2/0.25 = 8 hours = 480 minutes to pay for the added cost of the GMO soybeans.

     GMO-free foods would be low on the priority list of consumers in Africa, compared to consumers in the United States.

23.  If it is so obvious that farm subsidies hurt consumers of food, especially lower income consumers, why do such subsidies continue to be voted in by Congress? The gains of the program are concentrated in the hands of a few, who are willing to pay handsomely (e.g., through campaign contributions) for the programs. Meanwhile, the costs are spread widely—and thinly—across all taxpayers. The impact on any given voter’s tax bill is so small that few, if any, are willing to vote against someone who supports the farm programs, much less contribute money to see such a person defeated.

24.  How would a change in immigration laws that allowed more legal immigration into the U.S. affect the budget crisis we face with Social Security and Medicare? New immigrants tend to be younger and have larger families than existing U.S. residents, so they would be net contributors to both systems for a long time, thus reducing our budget woes.

25.  Has there ever been a problem with the extinction of cats, dogs or cattle?  Why not?  Why do fish stocks diminish to low levels? Extinction has not posed a threat to domesticated animals because people own them. Historically, ownership of animals has been stimulated principally by the animals’ economic value to humans, e.g., dairy cows and herding dogs. Ownership may also satisfy emotional needs, e.g., house dogs and cats. No matter what the purpose of ownership might be, however, when an individual has exclusive property rights to a resource she has incentive to use it in its highest valued use. In the case of domesticated dogs, cats, and cattle, human ownership has resulted in the long-term maintenance of the species: They are more valuable alive than dead. It is worth noting that numerous varieties of non-domesticated dogs, cats, and cattle have either become extinct or are threatened with extinction. The issue, then, is not species but property rights.


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