1. Whenever someone suggests that when families or guardians be fin...

1. Whenever someone suggests that when families or guardians be financially compensated for agreeing to donate organs from a loved one (or someone in their care) who has just died, the following objection is made: If the formerly “free” organ now has a price placed upon it, then that will make transplant operations more expensive. Is this an economically valid argument? Why or why not?
(The present system requires that organ donation be voluntary on behalf of individuals making donations, or the families who make the decision regarding a loved one who is about to die. Furthermore, the donation is made to a non-profit organ procurement organization, which then receives a fee when it directs the newly procured organ to the hospital where it will be used in the transplant operation.)
PLEASE KEEP IN MIND THAT THIS IS NOT A QUESTION ABOUT THE ETHICS OF SELLING HUMAN ORGANS. WE ARE DEALING WITH THE ECONOMIC ARGUMENT THAT OPPONENTS OF SUCH TRANSACTIONS HAVE BEEN MAKING. FURTHERMORE, DO NOT ASSUME ANY ROLE OF INSURANCE OR GOVERNMENT PAYMENTS IN YOUR ANSWER.

2. During Jimmy Carter's presidency, increases in the Consumer Price Index (CPI) reached double digits. In order to combat this problem, the Carter administration launched a Wage-Price Guidelines program in which businesses could not increase prices or wages above a certain percentage or the company would be prohibited from doing business with the federal government. A company also could find itself on the prohibited list if it earned profits higher than a percentage recommended by the government. The Carter administrated argued that higher profits are responsible for higher prices, so that if a company made lower profits, its prices would be lower, too.
Given what we have covered this term, did the Carter administration engage in accurate economic analysis and was its prohibition on "high" profits justified? Why or why not?

3. Several years ago, a columnist for the Boston Globe claimed that one of the main reasons drug prices were high was because of the cost of marketing. If pharmaceutical firms did less marketing, she reasoned, drug prices would be lower.
Economically speaking, is her argument accurate? Why or why not?

5. British environmentalist Kate Humble recently made the following statement:
“Everyone's going to hate me and call me a middle-class bitch but I'm past caring because I'm so incensed. Food waste is endemic but we don't value food because it's not expensive enough.”
Is Humble's statement economically correct? Explain your answer in detail.

6. Assume that your business firm is a price taker and that the company sells widgets at $10 apiece. Your firm is maximizing profits. One of your engineers discovers the presence of a substitute input that enables you to cut your production costs in half. Given that information, answer the following questions:
What price will you charge for your widgets following the discovery of the input and its subsequent use in production? Why? Will you decrease output, increase output, or keep output the same? Why?

10. Some economics textbooks refer to the factors of production as:
Land, Labor, Capital, and Entrepreneurship.
Why does Peter Klein say that it is inaccurate to include entrepreneurship as one of the factors? Explain your answer.