Question

1. Subsidized water for U.S. farmers tends to enrich farmers at the expense of everyone else.

Select one:

a. True

b. False

2.

Which of the following does Dwight Lee suggest as a solution to correct excessive pollution?

Select one:

a. Reduce the use of petroleum-based fuels

b. Place a tax on all large trucks and SUVs.

c. Expand markets & property rights into areas where externalities (i.e., pollution) exist

d. This is a market failure, these is no clear solution

3.

According to the Innovation essay, the author states that politicians often respond to disruptive innovations (such as Uber and Lyft) by:

Select one:

a. Suppressing it.

b. Subsidizing it to encourage more disruptive innovation.

c. Embracing the change, as it is the strength of a dynamic economy in the long run.

d. All of the above.

Answer 1

1. The federal government of US provide farm subsidies to the farmers for reducing their cost of crop production. It also helps farmers to sell their crops at lower prices in the prices. However, farmers are not under any obligation to produce crops for which they receive government subsidies. As it is well known every subsidy including farm subsidy is provided to farmers by taxing other people in the society. Therefore, the given statement is True.

2. Dwight R. Lee described excessive pollution as a market failure that results both from positive and negative externalities. When polluting firms emit pollutants in the environment it creates health hazards for people and considered as negative externalities. Similarly when government intervene to reduce emission in the environment it may yield positive or negative impact on the society. Therefore, the correct statement is d.

3. Disruptive innovation is the technology that makes significant transition in a sector such as internet and GPS technology. The internet technology has impacted almost every economic activity including transportation. Modern transportation companies such as Uber and Lyft has changed the mode of transportation in US and Western countries. These companies uses internet technology such as mobile App for online booking of Uber taxi by people. The arrival of Uber and Lyft transport has adversely impacted the conventional taxi services as it provide customized transport services to passengers. The politicians therefore, respond to disruptive innovation as a change agent in the dynamic economy. The correct statement is c.