QUESTIONS ON THE PRINCIPLES OF ECONOMICS LIBRARY UNIVERSITY OF CALIFORNIA SAN DIEGO j 1 \ \ QUESTIONS ON THE PRINCIPLES OF ECONOMICS THE MACMILLAN COMPANY NEW YORK BOSTON CHICAGO DALLAS ATLANTA SAN FRANCISCO MACMILLAN & CO., LIMITED LONDON BOMBAY CALCUTTA MELBOURNE THE MACMILLAN CO. OF CANADA, LTD. TORONTO QUESTIONS ON THE PRINCIPLES OF ECONOMICS BY EDMUND EZRA DAY, PH.D. ASSISTANT PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY AND JOSEPH STANCLIFFE DAVIS, PH.D. INSTRUCTOR IN ECONOMICS, HARVARD UNIVERSITY THE MACMILLAN COMPANY 1920 Ail rights rtnrvtd COPYRIGHT, 1915, BY THE MACMILLAN COMPANY. Set up and electrotypcd. Published September, 1915. Wortooot) J. 8. Gushing Co. Berwick & Smith Co. Norwood, Mass., U.S.A. PREFACE MASTERY of the principles of Economics demands more than a reading of text-books and supplementary selections. It calls for frequent and thoughtful consideration of problems, concrete and abstract, by which conceptions may be clarified, truths driven home, fallacies laid bare, and powers of analysis and discrimination developed. To furnish material for such disci- pline is the general design of this collection of questions. More specifically, such a collection in the hands of students in an introductory course in Economics may serve four main purposes : (1) Most obviously, the questions may stimulate the student's interest. Assigned in conjunction with portions of a text-book or collateral reading, they may tempt the student to relate for himself the abstract analysis to concrete conditions and events which he may observe, and find for a general argument its everyday, near-at-hand applications. (2) Secondly, such questions may aid in giving the beginner his points of compass in a first journey through a somewhat intricate subject. Thus he may more speedily acquire a sense of direction and proportion, a true perspective, which is easily missed in making the usual swift reconnaissance of the field of Economics. (3) In the third place, the questions may serve to prepare the way for more pointed and effective classroom discussion. By making the student's thinking less extemporaneous and hap- hazard, they may strengthen and deepen the analysis of more difficult points, and furnish a helpful plan for ordering and mastering the significant details of the simpler material. The authors believe this can be done without emasculating the test *i PREFACE of oral or written quizzes, and without weakening the student by furnishing unnecessary props. (4) Finally, by suggesting possible differences of opinion, the problems may arouse a questioning, combative mental attitude which conduces to independent thinking an exercise whose satisfactions few sophomores appreciate ; and by implying the shallowness or fallaciousness of certain commonly accepted catchwords or doctrines, they may promote an invaluable alert- ness of mind and encourage the student to lay a few bricks in a new intellectual structure of his own. The book is arranged particularly for use with Professor Taussig's "Principles of Economics" (revised edition, 1915). Accordingly, the questions cover the general range of subject matter and are arranged and numbered in the sequence of that work, e.g., question 27. 2 is the second question on Chapter 27. Similar collections already published contain a vast amount of excellent problem material, but this is in a form difficult for the ordinary student to use in connection with a text-book built on a different plan. To be most effective as a teaching device and as an aid to study, such a collection needs to be thoroughly accessible and easy to use. It is therefore expected that this book will be serviceable chiefly in the hands of students who are using Taussig's " Principles " as a text-book, and who will go through the questions chapter by chapter as they read the text. At the same time, the use of the questions with other text-books is not precluded, inasmuch as they are grouped under more or less traditional topics and are not commonly couched in phraseology peculiar to Taussig. Furthermore, many of the questions are far from being simple and elementary, and may profitably be considered by more advanced students, especially by those who have not had the advantage of a thorough in- troductory course. Indeed, in using the book in elementary courses, instructors will ordinarily find it advisable to " star " for omission certain questions on nearly every chapter, in order to limit the student's burden to " what the traffic will bear." The authors have refrained from making this selection in ad- PREFACE vff vance, believing that it may best be done with special reference to local needs. A few of the questions here presented are frankly borrowed from previously published collections ; and in such cases, except where the appropriation has been unconscious or accidental, credit has been given by appropriate initials. Acknowledgments are here made for adaptations or quotations of questions from F. A. Fetter's "Principles of Economics" (Fet); I. Fisher's " Suggested Problems for Teachers " (F.) ; S. Newcomb's " Prin- ciples of Political Economy " (N.) ; W. G. Sumner's " Problems of Political Economy " (S.) ; F. M. Taylor's " Principles of Eco- nomics " (T.) ; and the University of Chicago " Outlines of Economics" (O.). More of the questions have been drawn from a stock accumulated through several years in the hands of the instructing staff of the introductory course in Economics at Harvard University. Most of the question material, however, has been drafted by the authors during the past year with the specific purpose of the present book in mind. Even for this part no thoroughgoing originality can be claimed, so pervasive is the influence of the thoughts and phrases of others. But it is hoped that sufficient freshness of form and substance may be observable to justify the pretension of authorship. CAMBRIDGE, MASS., August 7, 1915. jsr-r-0^ 9 G**** *.. *..**<&-' * QUESTIONS ON THE PRINCIPLES OF ECONOMICS WEALTH AND LABOR 1. 1. Which of the following are economic goods : a Victor record; the moon; opium; the sunken Titanic; an athletic field; New York harbor; Caruso's voice; a five-dollar gold piece; a five-dollar bill; a mortgage; the registered trade name "Uneeda"; electricity; a primeval forest; a band concert; a glass eye; eyesight; weeds; land at the South Pole; friendship; labor? Define "economic goods." 1. 2. Which of the following are public goods: Hudson River ; the Panama Canal ; Yellowstone Park ; a city water system ; lakes stocked by the government with fish ; a harbor improved at government expense; a warship; the Weather Bureau service; a fire department; the University Museum? Define "public goods." 1. 3. May a thing be wealth (a) to one person and not to another? (6) at one place and not at another? (c) at one time and not at another? Illustrate. 1. 4. "Nothing can be wealth unless the total supply is so narrowly limited that every part of it is necessary to satisfy existing wants." Can you think of any exceptions? How, if at all, should you restate the point ? 1. 5. Did the Emancipation Proclamation diminish the amount of wealth in the Southern States? 2 QUESTIONS ON THE PRINCIPLES OF ECONOMICS 1. 6. "Labor employed in the productive work of in- dustry is usually excluded from the category of national 'wealth.' .... But there is no sufficient reason for iCS ex- clusion. Any increase of the efficiency of labor of a nation is evidently as much an increase of its total vendible resources as an increase in its instrumental capital would be." Do you agree ? 1. 7. Most goods after being sold to consumers can be resold only at a lower price; they are "second hand." Does the fall in selling value indicate a decline m the wealth of the community ? 1. 8. "The more things in the nature of wealth a com- munity has, the less prosperous it is." Do you agree? Why or why not ? 1. 9. Which of the following are labor : exercise to reduce one's weight ; golf-playing ; coaching a football team ; serving as a bank director; serving on an unpaid government com- mission ; painting for love of the art ; military service ? Define "labor." 1. 10. Is the irksomeness of labor inevitable? How, if at all, may it be minunized ? PRODUCTIVE AND UNPRODUCTIVE LABOR 2. 1. "Insurance is not production." Do you agree? If not, what product does an insurance company produce? a railroad company? 2. 2. Can there be production without the application of labor? Cite instances, if possible. Define "production." 2. 3. Are the following productive laborers : a contractor razing a building; a ticket speculator; a policeman on duty at an amateur baseball game; a grocer; a commission mer- chant; a bar-tender; a professor of fine arts; an examina- tion proctor; a bond salesman; a publisher of sensational falsehoods ; an agitator for Socialism ; the admiral of a battle- ship fleet ; the warden of a prison ; a lawyer who successfully defends a guilty person ; a smuggler of diamonds ; a smuggler of Chinese coolies; a politician campaigning for high office; the writer of an advertisement for a harmless patent medicine ? Define "productive labor." 2. 4. When a millionaire purchases an up-to-date factory building which stands opposite his house and razes it in order to improve his view, is his action productive? 2. 5. "Some years ago a paper manufacturer near New Haven was offered a round sum if he would close his mill. This he did, to the benefit of both himself and his former rivals." Was his action productive ? 2. 6. "Economic productivity is not a matter of piety or merit or deserving, but only of commanding a price. . . . The test of economic productivity in a competitive society is the fact of present gain, irrespective of any ethical criteria." Do you agree? 2. 7. Is all . productive labor honorable? legal? Is all unproductive labor dishonorable? illegal? Illustrate and give reasoning. * THE DIVISION OF LABOR AND THE DEVELOP- MENT OF MODERN INDUSTRY 3. 1. What are the various forms of the division of labor? What are the advantages of each ? What disadvantages have resulted from the division of labor? How, if at all, may these be reduced or eliminated? 3. 2. What was the Industrial Revolution? When did it begin? Is it a thing of the past? How has it affected the division of labor ? 3. 3. Would the Industrial Revolution have taken place if transportation facilities had remained unimproved? In what way were improvements in transportation stimulated by developments in the industrial arts? 3. 4. Division of labor has been described as " unconscious cooperation" and as "specialization." Are these descriptions accurate ? Which seems to you preferable ? 3. 5. Should you expect a high development of the division of labor in (a) truck farming ? (b) the manufacture of jewelry ? (c) automobile repairing ? (d) carpentering ? (e) interior deco- rating? In each case give reasons. 3. 6. "The division of labor is limited by the extent of the market." Explain with reference both to the geographical division of labor and to the division of labor among individuals. What other factors may limit the division of labor in any industry ? 3. 7. What sorts of gain result from the geographical divi- sion of labor? Are there analogous gains in the division of labor among individuals? ^**J * t-^^^f /T" ^t^^c^^e^) /\ \ ** J // / x^^J*' X7 *-*-v^*^i^a-iA^i aJb~+. - (H. +, *** , *c-t^-^Cxitv^L* L I ^+ LCnfiU^r "OCxC <^U. LARGE-SCALE PRODUCTION 4. 1. Which advantages of, and which limitations upon large-scale production appear most prominently hi (a) the iron and steel manufacture? (b) retail trading? (c) dairy farm- ing? (d) job printing? (e) watch manufacturing? 4. 2. How do you account for the appearance of widely different scales of production (a) in different industries? (b) within a single industry? Give examples. 4. 3. What are the limitations upon large-scale production in agriculture ? in manufacturing ? Should you expect the scale of manufacture to be affected by a large increase of graduates from schools of business ad- ministration ? Should you expect the scale of agriculture to be affected by a large increase of graduates from agricultural colleges? Jt&fo+*+4t^ 4.^ >/ v^oes4ar^e-scaleDroduction entaji-4isao!vantages for>****"v (a) 0pioyers ? (b) laborers?^) consumers ? (d) society at large? 4. 5. What are the two forms of large scale management? Illustrate each. What forces tend permanently to establish each form? 4. 6. Give three possible advantages of combination as distinct from large-scale production. Does large-scale man- agement necessarily involve large-scale production? 4. 7. Do both horizontal and vertical combinations appear in the restaurant business in this vicinity? What forces pro- mote combination in this business? Why is competition able to persist? 4. 8. What motives lead most strongly to horizontal com- bination? to vertical combination? To which form of combination is the tendency the stronger ? Why? 7 *** , ' t \ATI*JI<*SI+ I 5. 1. Are the following capital: a dog; a wheat field; flour ; a workman's lunch ; a jail; a fountain pen; a rail- road bond; a railroad ticket; an opera singer's talent; coal in a locomotive tender ; a five-dollar gold piece ; a street rail- way franchise ; business goodwill ; a college dormitory ? 5. 2. "The difference between producer's and consumer goods is at bottom only a difference of degree." Explain. What is the essential difference between them? What two- fold relation does capital bear to consumer's wealth ? 5. 3. "The distinction . . . between Capital and Not- Capital, does not lie in the kind of commodities, but in the mind of the capitalist in his will to employ them for one purpose rather than another. . . ." Do you agree ? 5. 4. "Is it your opinion that the knowledge and skill in production which a man may acquire by long practice and study should be regarded as part of his capital? Compare the cases of two men, one of whom has saved his wages to be invested in bonds, while the other has employed his in educating himself so as to command higher wages." (N.) 5. 5. Draw up a list of the important forms which capital takes. 5. G. What is meant) by " saving " ? Is capital ever formed without saving? Does all saving result in the formation of capital ? Does all investment ? If possible, give examples. 5. 7. "The savings of the people of the United States are nearly a billion dollars a year. What and where are they?" (Fet.) 5. 8. "It is ... the genesis oj new capital that requires abstinence. The maintenance of it, the mere renewal of the .-^e <"**.-", +*J^> 10 QUESTIONS ON THE PRINCIPLES OF ECONOMICS wasting tissue of it, does not. . . . The keeping up of the series of capital goods is, hi a sense, automatic. The mill, the ship, etc., virtually replace themselves as they are worn out." Do you agree ? 5. 9. "Through long periods of saving the capital in the community has been so greatly increased that there is no longer any need for individual saving. . . . Hence, the hard-fisted man is not in demand, but rather the man who will consume and enjoy. It is no longer necessary that a man abstain hi order to save. The modern community as a cooperative group is producing enough for all." Do you agree ? 5. 10. To what extent and in what manner do the follow- ing contribute to the formation of capital : a miser ; a postal savings bank ; a life insurance company ; government borrow^ "ing; a manual training school teacher^ a college prof essor ? 6. 11. What obstacles hindered the creation of capital in primitive times ? What obstacles to-day impede the growth of capital hi Mexico ? in the United States ? 6. 12. "Capital is produced." "Capital is saved." Can these two statements be harmonized ? 5. 13. Why should wages paid to subway laborers be called "advances"? Are all wages "advances" hi the same sense ? "^j^ 6. 14. Capital has been variously characterized by econo- mists as (a) " inchoate wealth "; (b) " congealed labor "; (c) "in- termediate goods " ; (d) "produced means of production" ; (e) "future goods." In what sense is each an apt description ? Which is preferable ? 5. 15. What distinction has been drawn (a) between "capital to the individual" and "capital to the community"? (b) between "capital" and "capital goods"? 5. 16. In what terms may the quantity of capital be measured ? A f-2vv*xth~i^v / THE CORPORATE ORGANIZATION OF INDUSTRY 6. 1. Should you expect corporations or partnerships to be the more common in (a) retailing bonds? (6) truck farm- ing? (c) gold mining? (d) the manufacture of explosives? (e) automobile repairing? (/) preparatory school education? (g) ship building? (H) aerial navigation? (i) insurance? 6. 2. A corporation, formed with capital stock of $10,000, is forced to dissolve. Its outstanding debts are $15,000. How much will be lost (a) by the creditors, (b) by the stockholders, if the assets yield $10,000? $15,000? $20,000? $30,000? 6. 3. Enumerate the distinctive characteristics of the cor- poration. Which seem to you most important and why ? 6. 4. Do you see any causal connection between the great increase of corporations and the Industrial Revolution in its later stages? 6. 5. In what respects is the wide extension of the cor- porate organization of industry advantageous, in what respects disadvantageous, for (a) the business man? (b) the investor? (c) the community at large ? 6. 6. Should you favor a tax, at the rate of 1 per cent of the market value, on all transfers of corporation securities ? 6. 7. Who are the financial middlemen of this vicinity? of New York City ? What part do they play (a) in the forma- tion of capital ? (b) in the management of corporations ? 6. 8. How has the corporate organization of industry made (a) savings more "liquid"? (b) financial middlemen more powerful? (c) the leisure class more permanent? SOME CAUSES AFFECTING PRODUCTIVENESS 7. 1. "In the building of a new town in Maine it was found to be economical to spend considerable sums of money for supplying food for the men at less than cost, rather than to have them eat the food provided by the local boarding- houses." Explain. 7. 2. Under what conditions would an increase of wages cause a prompt increase in the efficiency of the wage earners? Assuming an increase of efficiency possible by such means, should you expect employers to raise the wages ? 7. 3. "The curse of the poor is their poverty." What are the economic grounds for this statement? 7. 4. What should you consider the "necessaries for effi- ~ciency" for a pick-and-shovel worker? a bookkeeper? a motor- man? an artist? a foundry hand? the president of a large rail- road company ? 7. 5. Is it desirable that wages should always be sufficient to provide the "necessaries for efficiency"? no more than sufficient? 7. 6. In what way is the productiveness of labor affected by (a) a wide diffusion of elementary education? (b) extensive opportunities for technical education ? (c) extensive facilities for higher education? 7. 7. Under what conditions, if any, might an effective increase in educational facilities lower wages (a) for certain individuals? (6) in general? 7.^8. "The business men sit by and merely levy toll." Criticize. ' i&^ ~ *- L~^U^~1 7. 9. How is industrial leadership affected by (a) the 13 14 QUESTIONS ON THE PRINCIPLES OF ECONOMICS diffusion of education? (b) freedom of opportunity? (c) in- equality of possessions? (d) immaterial rewards? 7. 10. Concisely describe the economically important ele- ments in the immaterial equipment of the United States. What is essential to the maintenance of this equipment ? its increase ? EXCHANGE, VALUE, PRICE 8. 1. "Internal commerce does not increase the wealth of a nation since it only transfers goods from one person to another." (T.) Do you agree? 8. 2. In what sense is the term " value " used in the fol- lowing statements? (a) "Whisky is of no permanent value to society." (b) "We offer the biggest values in the city." (c) "The book cost me two dollars, but that does not measure its value." (d) "The floods caused a tremendous destruction of values." (e) "The value of a silver dollar is really only forty cents." (/) "Prices of railway and industrial stocks may still be below values." 8. 3. "Any commodity in general use will serve passably as a medium of exchange." Can you think of any commodi- ties now in general use in this community of which the state- ment is not true ? What commodities other than gold and silver might serve satisfactorily as mediums of exchange ? 8. 4. How should you determine the value of an ounce of gold? your overcoat? a railroad terminal? a court house? a college stadium? a book prized for sentimental reasons? 8. 5. A general rise in prices takes place. What does this indicate as to (a) the price of potatoes? (6) the value of money? (c) a general rise in values? 1 6 QUESTIONS ON THE PRINCIPLES OF ECONOMICS 8. 6. Suppose the following course of prices : 1873 1895 IQI2 Silver per ounce Si. 30 $0.65 $061 Wheat per bushel 1. 32 .67 I.IO Relative height of prices in general . . . IOO 60 85 What changes, if any, would be indicated in the values of silver and wheat (a) from 1873 to 1895? (b) from 1895 to 1912? -t/ ^ J^ * (4i+s/m+*'+* #*^f VALUE AND UTILITY 9. 1. Can you think of anything possessing value but not utility? utility but not value? both utility and value but having no price ? 9. 2. If the supply of an article is increased, how is the value per unit ordinarily affected? Why? Does the value of the total stock rise or fall ? Why ? 9. 3. Granted that more satisfaction is often derived from the second hearing of an opera than from the first, and from the fifth olive than from the first, are these cases exceptions to the tendency to diminishing utility? State the law of diminishing utility. 9. 4. List some goods in respect to which the point of satiety tends to be reached most rapidly (a) in your own case ; (6) in the case of society at large. Define "point of satiety." 9. 5. Of what is "consumers' surplus" a surplus? Is it shared equally by all consumers? Under what circumstances should you expect a large con- sumers' surplus ? a small ? What difficulties are encountered in its measurement? 9. 6. What different meanings may be attached to the phrase "the income of a community"? Is all "income" of economic significance? 9. 7. If all men possessed equal property and equal income, (a) would changes in the supply of a commodity affect its price less or more than at present? () would the marginal utility of money be the same to all? (c) would all men enjoy the same consumers' surplus for each commodity? (d) would human happiness be greater or less? c 17 MARKET VALUE. DEMAND AND SUPPLY 10. 1. In what sense is the term "market" used in the following statements? (a) "The division of labor is limited by the extent of the market." (b) "I am going to market." (c) "We should build up our South American market." (d) "There was no market for apples." (e) "There is a world market for cotton." Define "market." 10. 2. What two interpretations may be given the state- ment, "The demand for gasoline has greatly increased"? Which interpretation is employed in this chapter? Define "demand." 10. 3. The demand for such goods as building lots, paper, salt, and unskilled labor is sometimes called a "composite demand." Why? Give other examples. 10. 4. The demand for such goods as plows, agricultural land, motor trucks, and copper is sometimes called a "derived demand." Why? Give other examples. 10. 5. Should you expect the demand for the following to be elastic or inelastic: diamonds; salt; pepper; hair cuts; ink ; tennis balls ; playing cards ; automobiles ? Define (a) "an elastic demand" ; (b) "elasticity of demand." 10. 6. Should you expect the demand for a commodity to be elastic or inelastic (a) if there are many available substi- tutes for it ? (6) if there are many possible uses for it ? (c) if its price places it beyond the reach of the masses ? (d) if the desire for it is nearly satiated? (e) if the desire for exactly this com- modity is deeply ingrained? 10. 7. "Are supply and stock on hand the same?" (O.) 19 20 QUESTIONS ON THE PRINCIPLES OF ECONOMICS Does the supply of a commodity include what is possessed by consumers? May the supply of a commodity exceed the en- tire quantity in existence? Define "supply." 10. 8. Would doubling the supply of all commodities affect exchange values? (Fet.) 10. 9. "I am yet unable to understand how it happens, with our export of flour stopped, that the price to local con- sumers is still going up." (From a speech made soon after the outbreak of the European war.) What explanations can you suggest ? 10. 10. What is meant by the following statements? (a) "Value is determined by marginal utility." (6) "Value is determined by the equilibrium of demand and supply." Are the statements consistent ? 10. 11. Indicate the order in which the following demand schedules stand with respect to elasticity of demand. Plot demand curves corresponding to the schedules. ASSUMED PRICES NUMBER OF UNITS THAT WOULD BE TAKEN Of a Of b Of c 25* IOO 400 50 20 IS 200 300 500 600 IOO 2OO 12 IO 8 6 5 400 450 600 800 1,200 700 800 900 1,000 I,2OO 4OO 800 1, 600 2,500 3,600 4 2,OOO 1,250 5,000 3 3,ooo 1,300 10,000 2 5,000 1,350 20,000 I 8,000 1,400 40,000 MARKET VALUE. DEMAND AND SUPPLY 21 10. 12. "If demand is doubled, the supply remaining the same, the price is doubled; and if the supply is doubled, the demand remaining the same, the price is reduced one half." Do you agree ? Illustrate by diagram. 10. 13. Why does the demand curve usually descend toward the right? Does it necessarily so descend? What is indicated when the demand curve touches the vertical axis? the horizontal axis? What is signified by a sharply declining demand curve? an almost horizontal demand curve ? How should you represent an increased demand? a doubled demand ? 10. 14. Construct a diagram showing the determination of the market value of first-edition Shakespeares. 10. 15. Distinguish market value and normal value. Can you determine the normal value by averaging market values? Is there a normal value for seasonal goods; perish- able goods ; domestic service ; a first folio of Shakespeare ? 10. 16. In what ways is the demand for capital goods dependent upon (a) "the utility of the consumable goods they aid in making"? (b) general business conditions? 10. 17. What forces tend to make retail prices inflexible? flexible? How far are retail prices determined by marginal utility? 10. 18. What is meant by a "fair price"? 10. 19. Under what circumstances may utility to sellers affect the price of an article? SPECULATION 11. 1. What is meant by "dealing in futures"? How does it tend to affect (a) the price of wheat for the farmer? (b) the profits of the miller? (c) the price of flour to the consumer? 11. 2. Should you expect the development of cold storage to mitigate or to aggravate fluctuations in the prices of perish- able foodstuffs? 11. 3. Why should there be more speculation (a) in cotton than in wool ? (b) in corn than in rice (in the United States) ? (c) in stocks than in bonds ? (d) in copper than in steel ? What conditions are most conducive to the development of organized speculation in any commodity? 11. 4. How does organized speculation tend to affect (a) the market value, (b) the normal value, of the commodities concerned ? How does it affect value to the producer? value to the consumer ? 11. 5. "The more speculators, the better for the legitimate dealer." Why or why not? 11. 6. What is the essential difference between the produc- tive and the unproductive speculator? Give at least two reasons why the activity of the latter is economically undesir- able. Why is it not suppressed ? 11. 7. "A great point has been made of the fact that prices have advanced so little [in the wheat market since the opening of the war]. ... It is greatly to be hoped that the Government will not attempt to do more than modify any vicious and extreme fluctuations of price. Should they do so they may very easily produce later effects much worse than those they seek to avoid." In what ways might the prevention of an advance in price be objectionable ? 23 VALUE UNDER CONSTANT COST 12. 1. What are the important elements of cost in the production of (a) illuminating gas? (b) raw cotton? (c) an- thracite coal? (d) fine watches? (e) railway transportation? (/) grand opera? Should you include in cost (a) the rent of the building and site occupied? (b) interest on the bonds of the producing cor- poration ? (c) dividends on its common stock ? 12. 2. Under conditions of constant cost of production is the cost per unit the same (a) for all producers at the same time? (b) for a single producer at different times? (c) for all parts of one producer's output ? (d) for outputs of different size at a given time ? 12. 3. Should you expect to find production at constant cost in a business in which (a) the output is conditioned by fertility of soil? (6) rapid improvement in methods of produc- tion is taking place ? What conditions of production are essential to constant cost? Cite industries in which you think these conditions are approximated. 12. 4. How, if at all, would the doubling of a demand for a commodity produced at constant cost affect, in the long run, (a) its marginal utility? (b) the quantity exchanged? (c) its value per unit? (d) the cost per unit? In what respects would the immediate effect be different? Illustrate by diagram. 12. 5. Two commodities produced at constant cost re- quire for their production equal amounts of the same raw material and equal amounts of the same grade of labor. Would their market values be the same ? their normal values ? 12. 6. What is meant by "free competition"? Draw up a list of obstacles to the play of competition. as VALUE AND VARYING COSTS. DIMINISHING RETURNS 13. 1. "Marginal cost determines value." Explain "mar- ginal cost." Under what conditions, if at all, is the statement true? When costs are different for competing producers, whose cost determines the normal value of the product when the differences in cost are (a) temporary? (6) permanent? 13. 2. "A market price at which marginal cost and mar- ginal utility do not coincide cannot persist." Explain and illustrate by diagram. 13. 3. How, if at all, would the doubling of the demand for a commodity produced at increasing cost affect, in the long run, (a) its marginal utility? (b~) the quantity exchanged? (c) its value per unit ? (d) the marginal cost ? In what respects would the immediate effect be different? Illustrate by diagram. 13. 4. "Agricultural land cannot yield increasing returns as there is a limit to its productivity. Its returns are hardly ever constant as land becomes poorer with each succeeding crop and must be fertilized. On the other hand, factories usually yield increasing returns due to the invention of new processes." This statement involves a mistaken notion of increasing, constant, and diminishing returns. Point out the errors. 13. 5. "The price of wheat this year (1900) is lower than it was in the year 1800. This surely proves that, during the period indicated, the industry of wheat raising was subject to the law of increasing rather than that of diminishing returns." (T.) Does it? 27 28 QUESTIONS ON THE PRINCIPLES OF ECONOMICS 13. 6. Given: VALUE OF LABOR AND CAPITAL INVESTED PER PLOT or 10 ACRES TOTAL YIELD IN BUSHELS PE PLOT $5 10 35 80 15 135 20 2OO 25 275 30 300 35 3 J 5 40 320 At what point does the tendency to diminishing returns appear? If the price of the product were $1 a bushel, how much labor and capital could profitably be employed on each acre ? 13. 7. Concretely, how should you expect the tendency to diminishing returns to show itself in (a) dairying? (6) mar- ket gardening? (c) forestry? (d) copper mining? (e) the manu- facture of locomotives? (/) office buildings? VALUE AND INCREASING RETURNS 14. 1. "Here cost is supposed to be uniform but not con- stant, it becomes less per unit as the number of units in- creases." What conditions of cost of production are here described? Distinguish the terms "uniform" and "con- stant." Explain the statement and illustrate by diagram. 14. 2. "We have a good example of diminishing costs and increasing returns in the case of the Edison Electric Light Co., which is yearly reducing the price of its incandescent bulbs." Do you agree ? 14. 3. "While this metal [Tungsten] is almost exclusively used in electric lamp filaments and the supply controlled by the General Electric Co., under an increased demand price would soon go down to a few dollars per pound." How might this be? 14. 4. "Telephone officials agree that it costs more and not less to serve a subscriber in a large town than in a small one, even if the number of calls used is the same." Should you for this reason consider the telephone business conducted under conditions of diminishing returns? What is the unit for which cost must be calculated in this business? 14. 5. Explain "producers' surplus." Under conditions of increasing returns is there a producers' surplus? Is there such a surplus under conditions of diminishing returns? Illustrate by diagram. 14. 6. How, if at all, would the doubling of the demand for a commodity produced at decreasing cost affect, in the long run, (a) its marginal utility? (b) the quantity exchanged? (c) its value per unit ? (d) the cost per unit ? In what respects would the immediate effect be different ? Illustrate by diagram. 29 30 QUESTIONS ON THE PRINCIPLES OF ECONOMICS 14. 7. Should you class as "external" or "internal" the economies secured (a) by Milwaukee brewers from the loca- tion of a bottle factory in that city? (6) by a railroad system through the operation of a large car repair shop ? (c) by a shoe manufacturer through the establishment of his factory hi Lynn? (d) by a large chain of drug stores through the control of a German chemical company ? 14. 8. Enumerate the causes of the tendency toward in- creasing returns. If internal economies were attained indefinitely, what would be the outcome and why? What factors generally prevent this outcome ? MONOPOLY VALUE 15. 1. Are the following monopolists: (a) the owner of a copyright; (b) the owner of the best site on the lake front in Chicago; (c) a corporation manufacturing 80 per cent of the steel rails sold in a country; (d) a corporation purchasing 80 per cent of the steel rails sold in a country ; (e) the United States post office ; (/) the sole possessor of the secret of making glass flowers ? Define "monopoly." 15. 2. Can a monopolist sell all of a given stock of goods for more than the identical stock would bring under competi- tive conditions? Why can a monopolist make more profit than competing producers ? 15. 3. Can a monopolist charge what he pleases for his product? What determines the precise point at which the monopoly price tends to settle? 15. 4. Is the entire profit of a monopolist "monopoly profit"? What is monopoly profit? How does it differ from "producers' surplus"? Illustrate by diagram. 15. 5. In what ways, if at all, is monopoly price affected by (a) cost of production per unit? (6) potential competition? (c) an elastic demand for the product? (d) the existence of satisfactory substitutes for the product? (e) hostile public opinion ? 15. 6. "The Dutch East India Company used to destroy part of its spice crop to enhance its profits." What conditions were essential to make this policy a good one for the company? 15. 7. Suppose a monopolized article is produced under conditions of constant cost. What price policy will the monopo- list adopt ii the demand for the article is (a) elastic? (6) inelastic? Illustrate by diagram. 3* 32 QUESTIONS ON THE PRINCIPLES OF ECONOMICS How, if at all, will the monopolist's policy differ if he pro- duces under conditions of diminishing cost? Illustrate by diagram. 15. 8. Given'the7ollowing conditions of demand and supply : ASSUMED PRICES QUANTITY DEMANDED EXPENSES or PRODUCTION Iff 1,000,000 ' 2 3 900,000 800,000 4 5 6 7 8 700,000 600,000 500,000 400,000 300,000 $10,000 plus 2ff per unit 9 200,000 10 100,000 (a) Draw up a supply schedule, (b) What price would be fixed under conditions of competition? (c) What price would yield the maximum profits to a monopolist? Illustrate by diagram. 16.9. What is "dumping"? What induces it ? To what extent is it dependent upon (a) monopoly conditions? (6) tariff barriers? 16. 10. What is the effect of a successful corner in wheat on the price of (a) wheat to outside speculators? (b) flour to the consumer ? JOINT COST AND JOINT DEMAND 16. 1. In what respects do the following illustrate either joint supply or joint demand : general farming ; book publish- ing ; ship building ; retailing groceries ; university instruction ; automobile manufacture? Cite four examples of joint demand not previously men- tioned. 16. 2. What elements should you consider in calculating the cost of transporting by railway (a) a trainload of hogs? (b) a carload of potatoes? (c) a tub of butter? In what respects would the calculation of cost be simpler in shipments by express companies ? 16. 3. Suppose an increase in the demand for beef hides. In what direction and by what means would this tend to affect the long-run value of (a) beef hides? (6) the best cuts of beef? (c) the poorer cuts of beef? (d) mutton? (e) bone fertilizer? 16. 4. What determines the value of (a) a group of three joint products? (b) the principal product of the group? (c) the by-products? How, if at all, would extensive advertising of the by-products affect the price of the principal product (a) if competition pre- vail? (b) if the production be monopolized? 16. 5. Suppose a, b, and c are essential to the production of x, and the demand for x increases. What determines how the prices of a, b, and c individually will be affected (a) imme- diately? (6) ultimately? CL tZ+JL' ^i^V-txtZX r ^ -H^T *o THE PRECIOUS METALS. COINAGE 17. 1. Are the following money: an individual's promis- sory note ; an individual's bank check ; a bank loan ; a govern- ment bond ; a postal money order ; postage stamps; a rail- road mileage book; a five-dollar bill issued by the Southern Confederacy ; an old Roman coin ; a bar of gold ? Define "money." 17. 2. What functions has money? To what extent are these well performed by (a) gold? (b) silver? (c) copper? 17. 3. "Would it be possible to have a standard of value which did not serve as a medium of exchange? a medium of exchange which did not serve as a standard of value? Can you find examples in the currency of this country?" (O.) 17. 4. "The following were . . . used by the ancient Chinese as ... currency: (a) sea shells; () tortoise shells; (c) skins of beasts ; (d) domestic animals ; (e) pearls and precious stones ; (/) pieces of cotton and silk cloth ; (g) instruments of daily use." What qualities in each led to its use as money? In what respects was each defective ? 17. 5. Would gold serve as well as money (a) if it had no value apart from monetary use? (b) if it had but one tenth of its present value_? Would gold have as much value if it did not serve as money ? 17. 6. Distinguish "free coinage" and "gratuitous coin- age." 17. 7. What reasons are assignable for (a) the use of alloy in coining ? (7>) government monopoly of coinage ? (c) mill- ing coins ? (d) exacting seigniorage ? 17. 8. How much above, and how much below the mint price of gold may its market price be ? What conditions might 35 36 QUESTIONS ON THE PRINCIPLES OF ECONOMICS lead to this variation? What forces would prevent wider variation ? 17. 9. What is a dollar? Should you say "a dollar bill is a dollar," or "a dollar bill is worth a dollar"? 17. 10. If half the world's stock of money were suddenly to disappear, how would the following be affected : (a) the price level ; (b) the value of gold watches ; (c) the amount of wealth ; (d) general prosperity ? How do you measure (a) the quantity of money? (b) the amount of wealth ? 17. 11. "What facts go to determine the amount of money which a country needs?" (S.) QUANTITY OF MONEY AND PRICES 18. 1. How, if at all, is the value of money affected by (a) a greatly increased demand for gold ornaments? (b) an extension of the division of labor? (c) lavish expenditure? (d ) an increased rapidity of circulation of goods ? (e) the growth of mail order houses, e.g. Sears, Roebuck & Co.? (/) a de- creased hoarding of specie? 18. 2. In what ways should you expect a general European war to affect the value of money? 18. 3. If the value of money should decline 50 per cent, how would the value of gold jewelry be affected? How would its price ? 18. 4. Has the demand for silver increased in recent years? Has the demand for gold? Has the demand for money? 18. 5. How, if at all, does the drain of specie to the East affect the value of money in the Orient? in Europe? How do you explain any differences observed ? 18. 6. Washington is reported to have said, in 1797, on being told of the discovery of a silver mine, that "it would give him real uneasiness, should any silver or gold mines be discovered that would tempt considerable capital into the prosecution of that object, and that he heartily wished for his country that it might contain no mines but such as the plow could reach, excepting only coal and iron." Do economic considerations justify his view ? 18. 7. "If ten times the labor were given to gold mining that is now given, and ten times the gold were thereby got, the world would not be better off." Explain. Is gold min- ing productive labor? Would your answer be different if gold were used solely for monetary purposes? 37 38 QUESTIONS ON THE PRINCIPLES OF ECONOMICS 18. 8. "Thoreau thinks 'tis immoral to dig gold in Cali- fornia; immoral to* leave creating value, and go to augmenting the representative of value, and so altering and diminishing real value." (Emerson's Journal, 1854.) How far, if at all, should you agree ? THE COST OF SPECIE IN RELATION TO ITS VALUE 19. 1. In what particulars is the demand for gold essen- tially different from the demand for (a) raw cotton? (b) agri- cultural land ? (c) silver ? In what particulars are the conditions of supply for gold different from those for these same commodities ? In what respects is the relation of cost to value different in the several cases ? 19. 2. Has gold a normal value ? If not, why not ? If so, what determines it? 19. 3. What was the proportionate increase in the stock of the precious metals (a) between 1493 and 1660? (b) between 1850 and 1860? Was the monetary stock equally affected? What changes in the price level occurred in the two periods? How do you account for the slighter effects in the later period ? 19. 4. Gold can to-day be profitably extracted from ore which was discarded as waste in 1850. Prices to-day are ap- proximately 25 per cent higher than in 1850. How do you reconcile these facts ? Will a fall in the value of gold inevitably drive some mines out of operation? 19. 5. By what process does the value of gold determine what mine shall become the marginal mine ? 19. 6. Suppose the discovery of a new process which re- duces by 50 per cent the cost of taking gold from the ore. By how much and by what process will the value of gold be af- fected? the extent of gold mining? Is your answer consistent with Professor Taussig's conclusions ? BIMETALLISM 20. 1. Does the mint ratio of gold and silver remain stable when (a) the market ratio fluctuates? (b) the value of the silver in the silver dollar fluctuates? (c) the value of gold fluctuates ? What determines the mint ratio ? 20. 2. Does the government fix the value of the gold dol- lar? the silver dollar? the nickel? In what different ways may the government influence the value of money? 20. 3. A country freely coins a gold dollar containing 20 grains of fine gold and a silver dollar containing 300 grains of fine silver, and coins on government account subsidiary silver coins containing proportionately one tenth less of fine silver. What coins will circulate when the market ratio of gold and silver is (a) 16 to 1 ? (b) 15 to 1 ? (c) 14 to 1 ? (o FINANCIAL PANICS 30. 1. Distinguish the financial panic from the industrial crisis. Can there be an industrial crisis without a financial panic? a financial panic without an industrial crisis? Is the crisis more severe if accompanied by a financial panic? 30. 2. In time of panic is there less money than usual in the country ? in the banks ? in circulation ? Is there an unusually large demand for money ? 30. 3. "In times of panic, the only sound policy for banks ... is to lend freely." Why? Why is this policy difficult to pursue ? Is such a policy desirable " when the storm is brewing " ? 30. 4. What means should be employed to prevent the development of an incipient panic when a single bank is beset by a run? Are the same means available when distrust of the banks becomes general ? If not, why not ? If so, under what conditions ? 30. 5. What lending policy has been generally pursued by banks in the United States (a) when a panic has threatened? (ft) after a panic has been precipitated ? Why ? 30. 6. Why has an "emergency currency" been needed in time of panic in the United States? How has it been pro- vided, for what special purpose, and with what success? Will it be similarly needed and provided in the future? 30. 7. "Panics are bad in themselves, and bad in their after effects." Why? Can a similar statement be made as to crises? 30. 8. To what extent and by what means can financial panics be prevented? 30. 9. What are the major evils of the industrial crisis and depression ? By what means may these evils be alleviated ? What is the prospect of their entire disappearance ? 61 THE THEORY OF PRICES ONCE MORE 31. 1. In what forms may credit be extended? Under what circumstances does the use of credit dispense with the use of money? Under what circumstances does it not? 31. 2. How is the volume of deposits related to (a) the volume of transactions? (6) the quantity of money in circula- tion? (c) the amount of reserve money held by the banks? 31. 3. How do the following tend to affect the quantity of "purchasing power in terms of money" : (a) an increase of charge accounts; (b) money hoarding; (c) a limited issue of convertible government paper money; (d) an increased use of deposit accounts in commercial banks; (e) a change in the temper of the business community ; (/) the establishment of a stock exchange clearing-house; (g) an increased output of gold; (h) an increased output of silver? 4f]b 31.4. How would a decrease in "inactive" deposit ac- counts influence the total purchasing power? the price level jV^-iAA- 31. 5. What factors determine the propomon of 'bank deposits and notes to reserve money? 31. 6. The per capita stock of money in 1910 in various countries was estimated as follows : France $37-85 United States 35-21 Canada 29.05 British Isles 17.74 Germany 12.76 Russia 6.36 Japan 3.73 63 64 QUESTIONS ON THE PRINCIPLES OF ECONOMICS What, if anything, does this indicate as to (a) the per capita wealth? (6) the average of well-being? (c) the habits of the population ? What factors determine the amount of money per capita? 31. 7. By what process, if at all, should you expect the following to influence the general price level hi the United States: (a) advertising; (V) the growth of the trusts; (c) in- creasing demands of trade-unions; (d) extravagant purchases of automobiles ; (e) increased output from South African gold mines; (/) wider use of deposit accounts in France? 31. 8. What factors are primarily responsible for the great rise in prices in the United States since 1897? 31. 9. Wherein do modern currency systems fall notably short of perfection? 31. 10. What means have been proposed for stabilizing the price level? What obstacles stand in the way of their success? 31. 11. Define : "money" ; "currency" ; "cash" ; "specie." THE FOREIGN EXCHANGES 32.1. What is a bill of exchange? By whom and on whom is it drawn, and to whom is it payable? Illustrate its use hi the purchase of 1000 of cotton goods from J. B. & Co. of Manchester, England, by U. S. & Co. of New York City. 32. 2. Suppose that a New York importer can get 50 gross of Sheffield razors delivered in New York for 4Ad. each (the duty included), and that he can sell them for 95^ each. What would be his profit on such a transaction if the rate of exchange on London were $4.84? if the rate were $4.87? (T.) 32. 3. What is meant by "par of exchange"? Find the par of exchange (expressed in terms of francs to one dollar) between New York and Paris, given the fine gold content of the dollar as 23.22 grains and that of the franc as 4.48 grains. Would a rate of 5.20 indicate a premium or dis- count ? a tendency toward gold export or import ? 32. 4. What determines how widely the rate of sterling exchange may fluctuate? How has the range of fluctuation been affected by the general European war? 32.5. Who are the "dealers" in bills of exchange? Are they productive laborers? 32. 6. How is the rate of sterling exchange settled at any given time ? Would rates be different if there were no " dealers " in foreign exchange? What special factors influence the rate on "bankers' bills"? on "time bills"? 32. 7. A New York company sells a large shipment of oil to a railroad company in India. How might payment be effected through London? 32. 8. "The flow of specie sets in motion forces which F 65 66 QUESTIONS ON THE PRINCIPLES OF ECONOMICS sooner or later stop the flow." What are these forces? How do they accomplish this result? How does a rise in the rate of bank discount in London affect the flow of specie? 32. 9. What determines the par of exchange between (a) two gold standard countries? (b) a gold standard and a silver standard country? (c) a gold standard country and one upon a depreciated paper standard ? 32. 10. In what respects is domestic exchange essentially like foreign exchange ? different? 33. 1. List the kinds of transactions which give rise to payments (a) by persons in the United States to persons hi England ; (6) by persons hi England to persons hi the United States. 33. 2. How is the rate of sterling exchange in New York affected (a) immediately, (6) in the long run, by large purchases of American securities by English investors? How is the American balance of trade affected ? 33. 3. How should you expect the rate of sterling exchange in New York to be affected by (a) a financial panic in New York City? (b) a failure of the American wheat crop? (c) the rapid development of an American merchant marine? (d) a great increase in American gold output? (e) increased pur- chases of coffee from Brazil? (/) the general European war? 33. 4. The establishment of a postal savings system hi the United States is expected to bring about a diminution hi the remittances made to foreign countries by those who have recently immigrated to this country. Would such a change be to the advantage of the United States? If so, wherein? If not, why not? 33. 5. "These balance-of-trade reports show . . . that we have had no real prosperity hi this country for about six years. The balance of trade has been against us. As a nation we have been spending more than we have been earning. For three years hi succession we have been paying off this debit account by sending abroad an immense amount hi gold bullion. If we keep that up we will 'go broke.' We must see to it that more money comes in than goes out or Uncle Sam will go into the hands of a receiver." 67 68 QUESTIONS ON THE PRINCIPLES OF ECONOMICS What have you to say regarding these statements and their implications ? 33. 6. "Hundreds of millions of dollars are taken away from the United States each year by tourists, by returning immigrants, and to pay interest and dividends on our securi- ties held abroad. How can a nation, any more than an in- dividual, grow rich if it keeps on paying out more money than it takes in ? " Criticize. 33. 7. Suppose the people of one country to lend, through a long period, large sums annually to the people of another country. Trace the effects in the lending country, immediate and ultimate, on (a) the flow of specie; (b) merchandise im- ports and exports ; (c) the price of foreign exchange. Should you expect such a lending country to have a " favor- able" or an "unfavorable" balance of trade? THE THEORY OF INTERNATIONAL TRADE. WHY GOODS ARE EXPORTED AND IMPORTED 34. 1. "A country exports the things which are low in price within its borders." Does the United States export crushed stone, fresh vegetables, hay, copper? What implica- tions are involved in the quoted statement? 34. 2. What are the principal factors which lead to the export of (a) cotton from the United States? (6) cotton goods from England? (c) toys from Germany? (d) tea from China? (e) agricultural implements from the United States? 34. 3. Under what circumstances, if any, can a com- modity produced with labor paid high money wages be profit- ably exported to a country in which the same commodity 1 is produced with labor receiving low money wages? 34. 4. "We need not fear labor competition with Chris- tendom. The readjustment would involve some temporary hardship, but it would be only temporary. But to compete with the wages paid in India, China, and Japan would be im- possible. In some cases American wages would fall; in other cases American manufactories would cease. Wages at three or four dollars a day could not be long kept up in competition with wages at twenty-five, fifty, or even seventy-five cents a day. Oriental wages would rise a little; American wages would fall a great deal." Criticize. 34. 5. Can a country advantageously import a commodity in producing which its labor is more effective than labor is in producing that commodity in the country whence it is imported ? 34. 6. "It appears to me that all labor done directly and indirectly in carrying articles to the place of consumption which could have been produced in sufficient abundance, with as little 69 70 QUESTIONS ON THE PRINCIPLES OF ECONOMICS labor, at the place of consumption as at the place they were carried from, is useless labor." Lincoln's Complete Works, i. 92. Criticize. 34. 7. How should you state " the principle of comparative cost"? 34. 8. To what extent, if any, would international trade continue if labor were everywhere perfectly mobile? 34. 9. Under what conditions may it be profitable to pro- duce domestically a part, and to import a part, of a supply of a commodity? In what industries is such a division of the field most likely to persist ? THE THEORY OF INTERNATIONAL TI WHEREIN THE GAIN CONSIST 35. 1. Do countries participating hi .international trade share equally in its gains? Does a cptrfitry ever lose by par- ticipation in international trade i 35. 2. How is the partition of gains from international trade affected by (a) the nature of the demand for the articles traded? (b) changes in the amount of other payments than those for merchandise ? (c) the appearance of a new article of export? (d) differences in money incomes? (e) the effective- ness of labor in producing exported commodities? 35. 3. Show under what conditions the following may be true: "We may often, by trading with foreigners, obtain their commodities at a smaller expense of labor and capital than they cost to the foreigners themselves." (N.) 15. 4. "International trade is virtually a mode of cheapen- ing production." Explain. 16. 5. Is the United States a country of peculiarly high money incomes? of peculiarly high prices? In a country of high money incomes, which commodities will be at a relatively high price, which at a relatively low price? 1*7- a^Kjxtf* *s*~** *^> A o* o~ ^-^^T^tr J wM^V w ^^ PROTECTION AND FREE TRADE. THE CASE FOR FREE TRADE \ 36. 1. "The internal commerce of the United States the best possible argument for free trade." Explain. 36. 2. "When we buy manufactured goods abroad, get the goods and the foreigner gets the money. When we buy the manufactured goods at home, we get both the goods and the money." Criticize. 36. 3. In what manner and through what process does the imposition of a protective tariff on manufactures tend to affect (a) truck farmers? (b) other farmers? (c) the extent employment? ^V^J^ a? ^-il^jtAt^ *?** L. 36. 4. "There is nb*teal < excuse v ?qr baying printing out- side of Atlanta. Aside from patriotic motives ' oT loyalty to Atlanta's industries, the business men of the city have a narrow view of the subject if they think they can gain by sending printing orders away. The removal of $500,000 cash each year from this city represents an actual loss, because there is no exchange of trade on the part of Eastern and Western print- ers with Atlanta's stores and factories. . . . The vital point is : If Atlanta business men have all their printing done in Atlanta 500 more workmen would be needed by local printing plants to turn out the work ; 500 extra employees in the printing trades would spend their wages of $400,000 with Atlanta firms." Criticize. 36. 5. If the United States should abandon the policy of protection, how would real wages be affected? ^ cu lt '^*-<->-~- Jl \*~^ \J ^*AJ*--4* 36. 6. "The principle of protection is to build up our industries by manufacturing our own products. This gives our people employment, keeps the money in the country, and makes this country an independent and self-reliant nation." 73 74 QUESTIONS ON THE PRINCIPLES OF ECONOMICS Wherein, if at all, are these statements inaccurate or mis- leading ? Wherein, if at all, correct ? 36. 7. "The great advantage of foreign trade is in fur- nishing a market for our surplus products which would other- wise go to waste." Criticize. 36. 8. "If it costs 10 cents to produce a razor in Germany and 20 cents in the United States, it will require 100 per cent duty to equalize the conditions in the two countries. . . . And so far as I am concerned, ... if it was necessary to equalize the conditions to give the American producer a fair chance for competition, I would vote for 300 per cent as cheer- fully as I would for 50 per cent." Is this position a reasonable one ? 36. 9. What is to be said for and what against the policy of imposing duties (a) just sufficient to equalize differences in labor expense between the United States and foreign coun- tries ?*$>Jiriore than sufficient to equalize these differences? (c) less than sufficient ? ) the owner? (c) neither? 68. 4. How far is it true that a tax upon land is a "burden- less tax"? Can the same be said of a tax upon real estate? 68. 5. In what respects do different results follow according as real estate taxes are (a) imposed on owner or occupier? (6) assessed on rental or capital value ? 68. 6. Are working men taxed by real estate taxes affecting their dwellings? What difference does it make whether they or their land- lords are assessed for such taxes? 68. 7. To what extent have taxes on real property been relegated to local governing bodies? What are the reasons for this policy ? Is it wise ? *7 THE GENERAL PROPERTY TAX 69. 1. Why was the general property tax a satisfactory tax under simple industrial conditions? Why has it become " hopelessly impracticable " ? 69. 2. What results usually follow from attempts rigidly to enforce the general property tax? Explain and criticize the statement: "The general property tax works best where the letter of the law is disregarded." 69. 3. Is a rate of $20 in the $1000 more burdensome when imposed upon stocks and bonds than when levied upon real estate? Why or why not? What peculiar importance is involved in the selection of the rate of taxation on stocks and bonds? 69.4. What is "double taxation"? Under what cir- cumstances, if any, is it unobjectionable ? Why is the problem a serious one to-day in the United States? What solution can be suggested? 69. 5. Is it expedient to exempt public securities from taxation ? 69. 6. What changes have been suggested for improving American taxation of securities? What is to be said for and against each? 69. 7. What would be the probable consequences of (a) a general tax on wages? (6) an all-embracing tax on property? 139 TAXES ON COMMODITIES 70. 1. Distinguish "direct" and "indirect" taxes. 70. 2. What are the advantages of indirect taxes? Are there offsetting disadvantages? 70. 3. To what extent and by what process is a tax shifted to consumers when levied upon a commodity produced (a) at constant cost? (b) at decreasing cost? (c) at increasing cost? (d) by a monopoly? 70. 4. Distinguish excise taxes and customs duties. Is their operation proportional, progressive, or regressive? What are their relative merits for purposes of revenue? Should a large or a small list of articles be selected for either form of taxation? 70. 5. What are fiscal monopolies ? Cite examples. Are they desirable sources of public revenue ? Printed in the United States of America. f*+~f4~^#