Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 31, Problem 12QP
To determine
Evaluate the statement regarding rent seeking.
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Friedrich von Hayek won the Nobel Prize in Economics in 1974. In awarding the prize, the Academy specifically referred to his conclusion quoting the Academy, not Hayek "that only by far-reaching decentralization in a market system with competition and free price-fixing is it possible to make full use of knowledge and information."
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Chapter 31 Solutions
Economics (MindTap Course List)
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- Recall our example of t-shirt manufacturing in Lubbock. You started the business with your friend and selling each t-shirt for $10. However, people are not buying from you. Why is that happening? Now you figured that there are cheaper means to produce each t-shirt at $7 and you changed your t-shirt price to $9 making some positive economic rent. Will this last forever? Why or why not?arrow_forwardIdentify some essential elements common to any rational decision-making process?arrow_forwardWhy does sharecropping continue to exist as opposed to laborers renting land and paying for the rent with the proceeds of their harvest? Sharecropping is a farming system in which owners of the land allow others to farm it and then the harvest is split, with some portion (let's say half) going to the laborer and some to the land owner. Renting land (the "English system") is an alternative in which laborers pay a fixed monetary rent and then keep all of the proceeds of their production. For hundreds of years commentators have pointed out that sharecropping lowers overall investment and effort and that renting both generates more revenue for owners and, on average, more revenue for laborers due to the harvest generally being much larger. However, when prices drop significantly for agricultural outputs, rents can exceed the total value of output under the English system. Given that in the English system rent returns more money to land owners and on average generates more income for…arrow_forward
- In the capitalist economic system, the individuals through the forces of demand and supply interact to determine the allocation of resources as well as prices without external interference. Why then is the government sometimes justified to intervene in the economy to allocate resources?arrow_forwardThe trade-off between efficiency and equity is of great importance to economists. Why are economists so concerned about the impact of government policies and actions on efficiency and equity? Base your answer on economic theory.arrow_forwardYou have learned that the Law of Supply and Demand determines prices in a free-market system. Using a concrete example, describe how the Law of supply and demand works. (Hint: think about seasonal items or holiday-specific popular items, for instance).arrow_forward
- Why is private property so essential to the market system's functioning, and why must property rights be protected? What ways do property rights promote collaboration?arrow_forwardYou and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers, making it easy for engineering graduates to find employment, while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering. Which economic principle does this illustrate? a) Markets tend to move towards equilibrium as individuals respond to incentives. b) Government intervention can improve efficiency when there is a market failure. c) Changes in incentives are unlikely to change the decisions people make. d) Individuals do not normally take into account the decisions of other individuals.arrow_forwardAll people who have equivalent formal education earn similar incomes." Do you agree or disagree with this statement? Explain your position?arrow_forward
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