The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 6

What is the relationship between costs and prices? The four parts of this question ask you to analyze some specific cases.
(a) It costs a lot of money to build and equip a halibut fishing boat. Is that why halibut is so expensive to purchase? What is the relationship between the price of halibut and the cost of a fully equipped halibut fishing boat?
(b) Do people in poorer neighborhoods pay more for groceries because grocers must charge more to cover the high costs associated with higher crime rates? What is the relationship between the price of groceries and the cost of insurance in high-crime areas?
(c) Does the U.S. government offer price supports to farmers who grow certain crops because the cost of growing those crops is high? Or is the cost of growing certain crops high because the government offers price supports to farmers?
(d) Are hand-carved redwood flamingos that sell for $150 valuable because they take so many hours to carve? Or do people spend many hours carving redwood flamingos because they are valuable? Does the value of an object ever depend on what people know about how it was produced? Would a flamingo be more valuable if people thought it had been carved by Pope John Paul II than if they thought you had carved it?