ECO 251 NT1
Chapter 3 Homework

2. a) Both husband and wife being professional workers would reduce time available for a garden, therefore reducing the amount of household production.
b) With the household located in the city your land area is restricted, as well as you pay a higher price for the land, this would reduce the amount of household production.
c) Living in an area that has a high sales tax on food purchases would influence an increase in household production seeing as you are not taxed on what you produce.
d) Living in an area with a high property tax would case a reduction in household production due to the higher costs of owning the land.
4. In an economic analysis the assumed objectives of households is to maximize their utility, the firms is to maximize their profits, and the government is to maximize their votes.
8. The cottage industry system was all based on raw materials and hand craftsmanship. The Industrial Revolution offered more machines making things under peoples operation. So production shifted from by hand and slow to faster and machine made in the Industrial Revolution.
9. a) market failure
b) public good
c) externality
d) transfer payment
e) fiscal policy
12. When you allow the market to determine how much of a good with an external cost is produced they will always overproduce these goods because their cost is always lower than the general consumers cost.
14. The difference between a quota and a tariff is that a tariff is a tax on imported goods and a quota is the legal limit on the amount of product that can be imported or exported. Quotas benefit domestic producers of a good, but also harm the domestic consumer.