Discussion Questions

1. Part A: (Economic Systems) The United States is best described as having a “mixed” economy. What are some elements of command in the U.S. economy? What are some traditional elements?

Part B. Distinguish between a tariff and a quota. Who benefits from and who is harmed by such restrictions on imports?

2. Part A. (Externalities) Suppose there is an external cost, or negative externality, associated with production of a certain good. What’s wrong with letting the market determine how much of this good will be produced? Answer this question with the help of at least one example of negative externality.

Part B. The owner of a small pizzeria is deciding whether to increase the radius of delivery area by one mile. What considerations must be taken into account if such a decision is to increase profitability?