In an effort to prepare for war, the Defense Department is required by Congress to stockpile helium, once used to provide lift for blimps (phased out in the 1960s). About 100 years of total U.S. usage of helium is in storage. The Pentagon agrees to buy helium from producers at a price above what would otherwise prevail in the marketplace. Is this likely to result in efficiency? Explain
No. If the price is held up to provide a stockpile of helium, the price is above the market price. Society devotes more resources to helium production and storage than it would without the program, more than commercial buyers and users of helium would want to meet their needs. Society would be better off if the program ended, and the price of helium fell to a (lower) market level.
You might also like to view...
Holding other factors constant, if a tax cut moves the government budget from a surplus to a deficit, then the real interest rate will ________ and the equilibrium quantity of national saving and investment will ________.
A. decrease; increase B. decrease; decrease C. increase; increase D. increase; decrease
What is the current WTO policy regarding environmental standards and trade?
What will be an ideal response?
In the Brander-Spencer model the subsidy raises profits by more than the subsidy because of
A) the "multiplier" effect of government expenditures. B) the military-industrial complex. C) the forward and backward linkage effects of certain industries. D) the deterrent effect of the subsidy on foreign competition. E) the economies of scale once the company enters the market.
Accounting that relates how growth in inputs of production are related to growth in output is called:
A. input to output accounting. B. national income accounting. C. production accounting. D. growth accounting.