1. In the late 1970s, there was major controversy over a dam built by the Tennessee Valley Authority called the Tellico Dam, which is located near the mouth of the Little Tennessee River. After construction was completed and almost all of the land purchases (or evictions) had been done, the Supreme Court ruled that it could not go on because of the presence in the Little Tennessee of a fish on the endangered species list called the Snail Darter. (Congress later voted to exempt the dam from the law and the dam was closed in the late fall of 1979, creating Tellico Lake.)
While the economic benefits of the dam were admittedly dubious, one of the common arguments for completing the project was this: "We have spent more than $100 million to build this dam. Therefore, we need to complete it because we will have wasted all this money otherwise." Please evaluate this argument from an economic point of view.
2. A century ago in the United States, the Progressive Movement gained a lot of political power and Progressives sought to impose a number of regulations in certain lines of work to make them more "respectable" and "professional." For example, a number of Progressives in state legislatures helped to impose prohibitions on lawyers publicly advertising their services. (The state bar associations claimed that it was "unbecoming" for lawyers to be engaging in such "commercial" activities.)
Would the prohibition on advertising have benefitted African-American lawyers at the time, or would it have harmed their law practices? Explain your answer.
3. Assume that Congress passes a law that requires employers to provide hospitalization and an early full pension to any employee who has had a heart attack while being employed by that company.
A. Who would benefit from such a law?
B. Who would be hurt (other than employers, of course)?
4. A number of states and localities place caps on the interest rates that the so-called payday and car title lenders can charge borrowers. Supporters of these restrictions say that it prevents lenders from taking advantage of borrowers. Who would be hurt by these restrictions? Who would be helped?
5. Assume there are two doctors, one who had to borrow his way through medical school and now owes a half-million dollars (and is making big monthly payments) and another who had scholarship help and individual savings and inherited money, so that she does not owe anything for her medical education.
Assume further that both have the same abilities, practice in the same geographic area, and both specialize in ear, nose, and throat. Would the first doctor charge a higher fee in order to better pay off his education loans? Why or why not? For this question, we assume that insurance has no effect on what doctors will charge.
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1. The present value of a resource should also reflect its expected future value as it some of the economists believed that the benefits of the dam was uncertain as its present value was less the cost of building the Tellico dam. Even though some of them believed in the construction of the dam and its potential benefits, economically its benefits was not reflected in its present value and hence investing more in dam which is associated with a high degree of uncertainty would be hazardous. However the political pressure of discovering the Snail Darter which was among the endangered species and hence the suspension of the dam to be constructed was given by the government. This has resulted in the economic losses created by the government decision....
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