Macroeconomics

Unit Assignment

Economic Models and Trade

Respond to the questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions. Your paper should be highly organized, logical, and focused. Your answers should follow the APA format by being in double spaced paragraph format, with citations to your sources and, at the bottom of your last page, a list of references.

 

Questions:

1. A representative of the American clothing industry recently made the following statement: “Workers in Asia often work in sweatshop conditions earning only pennies an hour. American workers are more productive and as a result earn higher wages. In order to preserve the dignity of the American workplace, the government should enact legislation banning imports of low-wage Asian clothing.” Answer the following:

a. Which parts of this quote are positive statements? Which parts are normative statements?

b. Would such a policy make some Americans better off without making any other Americans worse off? Explain who, and why.

c. Would low-wage Asian workers benefit from or be hurt by such a policy, and why?

2. Referring to the same situation in question 1, but instead of legislation banning the imports, assume that the government enacts a special tax on imported clothing that is so high that the selling price of the imports would be equal to the selling price of the same clothing made in America. This kind of tax is called a tariff and is enacted to protect domestic producers of the same items that can be imported at much lower costs. Answer the following:

a. What would shoppers see when they shopped in Wal-Mart and the other “big box” stores that sell so many imported items?

b. Would this tax policy have a better effect, worse effect, or no different effect on American workers than the legislation banning the imports discussed in question 1? What kind of effect would the tax have on the Asian workers?

3. Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

Maximum annual output options

Quantity of potatoes Quantity of fish

(pounds) (pounds)

A 1,000 0

B 800 300

C 600 500

D 400 600

E 200 650

F 0 675

a. Examine the Maximum annual output options table above and the resulting Production Possibility Frontier Graph below and answer parts b – f.

Production Possibility Frontier Graph

b. Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes? Explain.

c. What is the opportunity cost of increasing the annual output of potatoes from 600 to 800 pounds?

d. What is the opportunity cost of increasing the annual output of potatoes from 200 to 400 pounds?

e. Can you explain why the answers to parts c and d are not the same?

f. What does this imply about the slope of the production possibility frontier?

Unit Assignment

Supply and Demand and Market Intervention

Respond to the questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions. Your paper should be highly organized, logical, and focused. Your answers should follow the APA format by being in double spaced paragraph format, with citations to your sources and, at the bottom of your last page, a list of references.

 

Question:

The small town of Middling experiences a sudden doubling of the birth rate. After 3 years, the birth rate returns to normal. Use the graphs for each question, adding any arrows or other indicators that you feel are necessary, to illustrate the effect of these events on the following.

1. What is the effect on the market for an hour of babysitting services in Middling today, during this increased birthrate? Explain the change, if any in the price of babysitting, and in both the amount of babysitting demanded and supplied, giving your reasons for these changes.

2. What is the effect on the market for an hour of babysitting services 14 years into the future, after the birth rate has returned to normal, by which time children born today, during this increased birthrate, will be old enough to work as babysitters? Explain the change, if any in the price of babysitting, and in both the amount of babysitting demanded and supplied, giving your reasons for these changes.

3. What is the effect on the market for an hour of babysitting services 30 years into the future, when children born today, during this increased birthrate, will be adults and are likely to be having children of their own? Explain the change, if any in the price of babysitting, and in both the amount of babysitting demanded and supplied, giving your reasons for these changes.

4. Answer a, b, c, and d using the following information:
Suppose that the supply schedule of Maine lobsters is as follows:
Price of lobster Quantity of lobster supplied
(per pound) (pounds)
$ 25 800
$ 20 700
$ 15 600
$ 10 500
$ 5 400
Suppose that Maine lobsters can be sold only in the United States. The U.S. demand schedule for Maine lobsters is as follows:
Price of lobster Quantity of lobster demanded
(per pound) (pounds)
$ 25 200
$ 20 400
$ 15 600
$ 10 800
$ 5 1,000
a. Looking at both the schedules of supply and demand, as well as the graph of the demand and supply curve for Maine Lobsters, what is the equilibrium price of lobsters and the equilibrium quantity of lobsters demanded and supplied at that price?

b. Now, suppose that Maine lobsters can also be sold in France. The French demand schedule for Maine lobsters is as follows:
Price of lobster Quantity of lobster demanded
(per pound) (pounds)
$ 25 100
$ 20 300
$ 15 500
$ 10 700
$ 5 900
What is the demand schedule for Maine lobsters now that French consumers can also buy them?

c. Using the combined U.S. and French demand schedule, the U.S. demand schedule and the supply schedule, and the graph below, analyze the change in the market for lobsters. (hint: use the 10 question Worksheet approach)
Explain your analysis
and answer these two questions.
1. What will happen to the price at which fishermen can sell lobster?
2. What will be the final output of lobsters?

d. What will happen to the price paid by U.S. consumers?

What will happen to the quantity consumed by U.S. consumers?
Supply and Demand of lobster
supply 100 200 300 400 500 600 700 800 900 1000 5 10 15 20 25 US demand 100 200 300 400 500 600 700 800 900 1000 25 20 15 10 5 Pounds of lobster
Cost per pound
Supply and Demand of lobster
supply 200 300 400 500 600 700 800 1000 1100 1500 1900 5 10 15 20 25 US demand 200 300 400 500 600 700 800 1000 1100 1500 1900 25 20 15 10 5 US & French demand 200 300 400 500 600 700 800 1000 1100 1500 1900 25 20 15 10 5 Pounds of lobster
Cost per pound
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