Free response question

IEO past paper: 2019 International Economics Olympiad, open questions

Chicago is one of the largest cities in the United States with an estimated population of 2.7 million. Located on the shores of freshwater Lake Michigan, Chicago is an international hub for finance, culture, commerce, industry, technology, and transportation. The University of Chicago boasts one of the best economics departments in the world, with at least 30 Nobel Prize winners affiliated with the department. Unfortunately, the city of Chicago has had a serious problem with drug (narcotic) consumption and drug trafficking. In 2012 alone, there were more homicides in Chicago than in any other metropolis in the United States: a total of over 500, most of which linked to gang violence. According to reports in 2013, "most of Chicago's violent crime comes from gangs trying to maintain control of drug-selling territories", and is likely related to the activities of the Sinaloa Cartel, one of the most powerful Mexican drug cartels, which by 2006 sought to control illicit drug distribution. Chicago's reputation of a drug trafficking city costs it billions of dollars every year in lost consumption, investment, and unnecessary spending. Chicago public policy officials aspire to reduce drug consumption as it produces negative externalities, which harm the society as a whole, not just the drug addicts.