Economics Questions and Answers

Economics Questions and Answers

Q1
This discussion board is about how the government protects certain industries and turns them into monopolies (lots more about the details of how monopolies operate later in chapter 9).
Read the article for DB1 in the docs and stuff section of the course.
1. Explain why drugs are covered and protected by copyright law but recipes are not.
2. What are the arguments for extending copyright protection to the fashion industry? How might it change the way clothes are produced and sold? Would it affect us, the final consumers?
3. What do you think? Should the law extending copyright protection to the fashion industry be passed?
Q2
Economists Steve Levitt and Jon Donahue raised a heated controversy in their May 2001 article linking the legalization of abortion and the decrease in crime rates. Read the two summaries of their argument.
1. Evaluate their argument. Don’t tell me how you feel, tell me what you think. There s a lot to be found on this topic: googling their names will get you thousands of hits. And if you re very, very ambitious, the original paper can be found here. Be warned, it s heavy going.
http://pricetheory.uchicago.edu/levitt/Papers/DonohueLevittTheImpactOfLegalized2001.pdf (Links to an external site.)
Here is a summary of the ideas:
http://freakonomics.com/2008/01/22/what-do-declining-abortion-rates-mean-for-crime-in-the-future/ (Links to an external site.)
http://freakonomics.com/2005/05/15/abortion-and-crime-who-should-you-believe/ (Links to an external site.)
2. Can you think of any alternative explanations for the drop in the crime rate observed during this period?
Q3
Read the article about the Economics of Spring Break here http://www.theatlantic.com/business/archive/2013/03/2-000-years-of-partying-the-
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s.html) brief-history-and-economics-of-spring-break/274347/ (Links to an external site.)
or in the Docs section of the courseroom.
1. Many localities work hard to increase tourism to their area. Does it appear famous spring break destinations in Florida reap large revenues
from college students coming to town in February-April?
2. What are the costs to a city or town of being a spring break destination area? What are the benefits?
3. Suppose you were a small beach town in Florida looking to increase budget revenues through tourism. If you were asked whether it would be
advisable for your city to try to attract college students during the late winter/early spring months, would you be in favor of doing so? Explain why or why not.
Q4
The Valley loves NASCAR, boy, this Yankee is just learning! Read this article on NASCAR in the docs and stuff section of this site and answer the following:
1. Is NASCAR s main goal to maximize profits? If not, what is their major goal? Is there a tradeoff involved here?
2. Is the motivation for the actions described in the NYT article (safety changes, blackbox data collection) connected to their goal? Explain.
3. If people tune in to see crashes (Nascar fans love crashes the way hockey fans love fights; when you watch the Speed Channel’s edited replays of Nascar races, the plot is always the same: green flag, crash, crash, crash, crash, crash, checkered flag.) , what kinds of incentives does the sport need to balance between attracting paying fans and maximizing profits?
Q5

Read the article for DB 5 in the docs and assignments section of the site called Ayers and Discrimination. This is a VERY famous study, and quite interesting.
1. Summarize in a few sentences what Ayers found about pricing strategies in car markets.
2. Do you think that this is a profit maximizing strategy? Do you think this is an appropriate and reasonable strategy for businesses to undertake it it increases their profits?

3. Can you think of other goods or services that could be – or are – priced the same way? Check out the article on discrimination in coffee shops
“Waiting for Good Joe” for some inspiration, also in the assignments section. Explain.
Q5
Read the article for DB 5 in the docs and assignments section of the site called Ayers and Discrimination. This is a VERY famous study, and quite interesting.
1. Summarize in a few sentences what Ayers found about pricing strategies in car markets.
2. Do you think that this is a profit maximizing strategy? Do you think this is an appropriate and reasonable strategy for businesses to undertake it it increases their profits?
3. Can you think of other goods or services that could be – or are – priced the same way? Check out the article on discrimination in coffee shops “Waiting for Good Joe” for some inspiration, also in the assignments section. Explain.
Q6
Read the article about “loosies” in the docs and assignments section of this site, as well as the article “The High Cost of being Poor”. Answer the following
1. Summarize the pricing strategy in a few sentences. Is it a MC=MR strategy|?
2. Does this kind of pricing strategy discriminate against the poor? How about the strategy of selling in bulk? Should it be against the law or should markets be free to work here, with buyers and sellers making transactions on their own terms without the hand of government intervening?
3. Can you think of any other examples of this kind of pricing strategy – legal or not?
Q7
Read this article at this link http://www.marieclaire.com/world-reports/news/why-do-women-pay-more (Links to an external site.) or in the Docs and Stuff section of this courseroom.

1. What are the requirements for successful price discrimination? Does this type of dry cleaning qualify?
2. What are other examples of price discrimination?
3. The effectiveness of price discrimination is a different question than whether businesses should be able to discriminate by price. Is this an issue that deserves regulation, or is it best left to the market?
Q8
Read the July 9, 2006 the Freakonomics column in the New York Times Magazine uploaded in the docs and stuff section of this site. The authors examine a simple supply-and-demand gap with tragic implications: the shortage of human organs for transplantation. In the space of just a few decades, transplant surgery has become remarkably safe and reliable. But this success has bred huge demand: as more patients get new organs, more patients want them.
So, while the number of kidney transplants has risen by 45% in the past 10 years, the number of people on a kidney waiting list has risen by 119%. Consequently, some 3,500 people die each year while waiting for a kidney transplant. A big problem is that would-be suppliers of kidneys, whether living or dead, are not given very strong incentives to step forward.
1. Summarize the main arguments about providing incentives for the supply side of this volunteer market.
2. Evaluate the argument carefully. What do you think? Why?