problem 1) Demand for illegal drugs is inelastic. Much of expenditure on illegal drugs comes from crime. Suppose these statements to be correct,
1. How would a successful campaign which decreases supply of drugs influence the price of drugs and the amount spent on them?
2. What would happen to amount of crime?
3. What is the most efficient way of decreasing quantity of drugs consumed and decreasing amount of drug-related crime?
problem 2) Before the Civil War, the South graded with the North and with England. It sold cotton and bought manufactured goods and food. During war, one of Lincoln’s first actions was to blockade the ports, that prevented this trade. The South had to increase its production of munitions and food.
1. In what did the South have a comparative advantage?
2. Did Civil War modify any opportunity costs in South? Did opportunity cost of everything rise? Or did items cost less?