Blockster, U.S.A. Economic Detective Problem

NAME
CLASS
DATE
Economic Detective
Problem
The Blockster neighborhood is located on the outer edges of prosperous Green City. Although
Blockster falls within the city limits of Green City, it is separated from the rest of the city by a
broad and wide area of forest and grassland. Residents enjoy their beautiful natural setting and
do not mind driving the distance each day to reach the offices, factories, and stores where they
work. Use what you have learned in this chapter to answer the questions that follow.
Investigation 1
Living in Blockster presents problems for schoolage youngsters. The school bus routes do not extend
that far, and few households can provide their own transportation. Ms. Smarte sees an opportunity. She opens a
private school in her garage and charges neighbors a fee
for sending their children. Some Blockster residents
refuse to pay Ms. Smarte’s fee; others think the convenience is worth it. Ms. Smarte is pleased with her earnings, but Blockster residents are unhappy with her limited
curriculum. The next year, they elect a city council candidate who promises to bring school buses to Blockster.
1. How does Ms. Smarte’s school demonstrate:
Economic freedom (a)
Voluntary exchange (b)
Self-interest (c)
Profit motive (d)
2. How do residents influence the government to
resolve Blockster’s school problem?
Investigation 2
Neighborhood children now ride to city schools
via the bus, but Blockster has new worries. A nearby
stream in the nature area overflows its banks, flooding
basements in Blockster. Some residents pool their money
and pay a local plumbing business to control the flooding. The company drains nearby land but does not have
the equipment to control the stream or prevent it from
threatening Green City neighborhoods again. After continued flooding, the city council raises taxes again and
builds a dam to hold back the stream waters. Even residents who would not pay to help control flooding enjoy
fishing in the pond created by the dam.
1. Identify an example of the free-rider problem.
2. Where did market failure occur?
3. Identify the positive externality in the solution to
the flooding problem.
© Prentice-Hall, Inc.
CHAPTER
3
Blockster, U.S.A.
Investigation 3
People throughout Green City are surprised
to learn that one of its large factories is laying
off workers because of fewer orders. At about this
time, several stores declare bankruptcy, a major
bank closes, and prices rise sharply. Unemployed
workers have to depend on unemployment insurance checks and food stamps. Other families plant
gardens and wear hand-me-downs to avoid paying
high food and clothing prices. Residents hope the
economy will soon improve again.
1. List three signs of economic instability in Green
City.
2. In what stage is the business cycle?
3. In what way does the government help?
4. Identify the microeconomic decisions made in
Green City.
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Chapter 3 Economic Detective