Around the World Activity

Chapter 8(19) Aggregate Expenditure—Around the World

Read the following articles and pages in order to answer the below questions.

"What's More Dangerous: Marijuana or Alcohol? Full Transcript", Freakonomics
"Employment down, productivity up?", The Economist

Question

1. According to the Freakonomics podcast “What’s More Dangerous: Marijuana or Alcohol?” which of these situations could be a potential positive externality from legalizing marijuana?

People would be more pleasant and patient.

The government could collect taxes from marijuana sales.

Alcohol users may substitute marijuana for alcohol, decreasing overall traffic incidents.

There are no potential positive externalities from legalizing marijuana.

Question

2. According to Steven Levitt, which scenario would be a possible way to deal with negative externalities if marijuana were to be legal?

Subsidize alcohol and marijuana use.

A tax could be placed on marijuana so that the negative externality is internalized.

The police force could be increased.

Institute public education campaigns to raise awareness about marijuana’s negative effects.

Question

3. In The Economist article “Employment Down, Productivity Up?” which point made in the article would support the claim that minimum wage laws reduce negative externalities while boosting economic growth?

Minimum wage laws tend to make individuals happier.

Minimum wage laws tend to discourage workers from getting more education.

When wages increase, workers may be more productive.

Minimum wage tends to decrease employment across all income levels.

Question

4. Which statement in The Economist article would NOT support the claim that minimum wage laws reduce negative externalities while boosting economic growth?

Minimum wage laws tend to decrease employment for affected workers (normally the young and low-skilled).

Minimum wage laws raise the wages of individuals across all income levels.

Minimum wage laws tend to make individuals more productive in their work.

Minimum wage laws tend to decrease employment for all workers.

Question

5. Often, government policy is aimed at reducing negative externalities. Which statement BEST describes the government’s situation when trying to balance mitigating negative externalities with achieving economic growth?

Policies that reduce negative externalities will always decrease economic growth.

Policies that reduce negative externalities may have positive or negative effects on economic growth.

Policies that reduce negative externalities have no effect on economic growth.

Policies that reduce negative externalities will always increase economic growth.