No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Six: Applications in Markets 147 CHAPTER SIX: QUESTIONS FOR REVIEW 1. The Fair MinimumWage Act of 2007 raised the minimum wage right as the economy entered into recession. a. Which groups historically are hurt by minimum wage increases? b. What has happened to their unemployment rate since the minimum wage hike? c. Show on an S&D diagram. 2. Governor Cuomo proposed increasing the minimum wage in New York in 2013 . If you were his advisor and he asked you to assess the impact of this legislation, how would you respond? 3. Why are entry-level positions (such as McDonalds) essential for young workers? List some skills that entry level positions demonstrate. 4. What are transaction costs? Why are they unavoidable? How do markets tend to reduce transaction costs? 5. Most small towns have lost small hardware and grocery stores to larger competitors. Since we’ve shown that middlemen create value, isn’t this an unambiguously bad outcome? What are some of the positives and some of the negatives of the demise of small businesses in rural America? 6. High gas prices in 2011 were blamed (as usual) on speculators. Assess what the result would be in a world without speculation. 7. This question requires speculation, but is useful to think about. Jesus was a carpenter before his earthly ministry. Do you think he sold his work? What do you expect regarding the quality of his work? If you think Jesus likely sold either his products or labor in markets, does that mean Jesus thought markets were necessarily moral? Do you think Jesus would have been in favor of legal restrictions on importation of foreign carpentry products such as tables and chairs? Why or why not? 8. Worries over depletion of global ocean fisheries are common. Why is this a problem? What could be done to prevent it?