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The Microeconomics of Domestic Security

The Microeconomics of Domestic Security. Table 1 Corporations’ Response Within Two Months. Table 2 Some Government Actions to Increase Domestic Security: September 2001 to September 2003. Without economic growth, opportunity cost of more security production is less production of other goods.

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The Microeconomics of Domestic Security

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  1. The Microeconomics of Domestic Security

  2. Table 1 Corporations’ Response Within Two Months

  3. Table 2 Some Government Actions to Increase Domestic Security: September 2001 to September 2003

  4. Withouteconomic growth, opportunity cost of more security production is less production of other goods. Figure 1a Production Possibilities Frontiers for Security Goods and All Other Goods (a) All Other Goods and Services A Q2 Q4 B Q1 Q3 Security Goods and Services

  5. In agrowingeconomy, opportunity cost is less growth in other production. Figure 1b Production Possibilities Frontiers for Security Goods and All Other Goods (b) All Other Goods and Services B B' Q4 A Q2 Q1 Q3 Security Goods and Services

  6. Figure 2 Direct Federal Spending for Domestic Security Billions of Dollars $50 45 40 35 30 25 20 15 10 5 0 2001 2002 2003 2004 Proposed Sources: Budget of the United States Government, Fiscal Year 2003 (Summary Table 5); Budget of the United States Government, Fiscal Year 2004 (Summary Table 5); and “Homeland Security Funding Primer,” Center for Arms Control and Non Proliferation, May 1, 2003.

  7. Table 3 A Rough Estimate of Increase in Narrowly Defined Domestic Security Spending in 2004 Over 2001

  8. Price per Price per Dog Dog Figure 3 An Increase in Demand for Bomb-Sniffing Dogs (a) Market (b) Typical Firm S1 S2 MC B B P2 P2 d2 ATC2 ATC1 C C d3 P3 P3 A P1 P1 d1 A D2 D1 q1 q3 q2 Q1 Q2 Q3 Number of Trained Dogs per Month Number of Trained Dogs per Month

  9. Figure 4 A Shift in Supply in a Distant Market for Retail Gasoline (a) Market (b) Typical Gas Station Price per Gallon Price per Gallon MC2 S2 S1 MC1 ATC2 B B P2 d2 P2 ATC1 A P1 P1 d1 A D Gallons per Month Gallons per Month Q2 Q1 q2 q1

  10. Figure 5 Changes in the Market for Air Travel Price per Passenger S2 S1 A P1 C P2 B D1 D2 Number of Passengers per Week Q2 Q1

  11. Figure 6 Changes in the Market for Strategic Language Speakers Wage W2 B W3 C A W1 Number of Qualified Strategic Language Speakers Q1 Q2 Q3

  12. (a) (b) S&P 500 Price per Share 1,150.0 $45 1,100.0 Lockheed 40 1,050.0 35 Overall Market 1,000.0 30 950.0 25 Figure 7 Share Prices for the S&P 500 and Two Defense Contractors in September 2001

  13. (a) (c) S&P 500 Price per Share 1,150.0 $45 1,100.0 40 1,050.0 35 Raytheon Overall Market 1,000.0 30 950.0 25 Figure 7 Share Prices for the S&P 500 and Two Defense Contractors in September 2001 (continued)

  14. Figure 8 Changes in the Market for Raytheon Shares (a) (b) S2 S1 Price per Share Price per Share S1 C $33.25 B $31.50 $31.50 B Dlate Oct. DSept. 17 DSept. 17 A $24.85 DSept. 10 Number of Shares Number of Shares 330 million 330 million 360 million

  15. Figure 9 Increased Security Concerns and International Trade (a) Mexico (b) United States D S Price (per Pound) Price (per Pound) G H 24¢ initial exports initial imports B A E F 20¢ 20¢ D 14¢ C D S 150 250 200 300 170 220 215 265 Tomatoes (Millions of Pounds per Month) Tomatoes (Millions of Pounds per Month)

  16. Table 4 Exports of Goods and Services as a Percentage of GDP, 2001

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