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

Chapter Six: Applications in Markets 148 CHAPTER SIX ANSWERS 1. A. Marginal workers—those with the least skills—are typically hurt the most. Empirically we see a higher impact on teenagers and minorities. B. It has risen. C. Draw a diagram like Figure 6.1 or Figure 6.2 . 2. As an economist, I would suggest that the poor and minorities would disproportionately feel the result. However, as a political advisor, I would advise him that most voters are rationally ignorant (see chapter 13)--so it might be good politics. 3. Many skills can be gained that will demonstrate to future employers you are a reliable worker, so they should be willing to invest further in increasing your skills. 4. Transaction costs are the costs associated with “cutting the deal” or making an exchange. They are unavoidable because we aren’t omniscient like God (so there are search and information costs). We have transportation costs to bring the buyer and seller together, and there is often some bargaining necessary to arrive at the best transaction cost for both, and we have to pay for some enforcement mechanism (such as taxes to government to be able to prosecute fraud). 5. No. Although I miss the small town shops, larger middlemen have demonstrated their superior ability to provide needed services at a more efficient price. The positives are better quality, better variety, and lower cost goods. The negative is loss of community as well as often the ability to buy in the neighborhood (without a long commute). You may have your own positives and negatives, but these are at least some to think about. 6. We would see slower adjustment to market realities (in situations where the speculator would correctly guess the direction in the future), so when the adjustment finally came it would take a larger adjustment to restore equilibrium. 7. Given this is speculative. But I suspect that Jesus did all He did to the glory of God, and that His handiwork would have been high quality—so that he might effectively serve His customers. The remaining questions are for you to think about and provide your own opinion. 8. There are few property rights for broad ocean fishing, such that overfishing is reducing the number of fish in the ocean. Assigning property rights would eliminate the tragedy of the commons.