How does a college education increase one’s human capital? Why does the downward-sloping production possibilities curve imply that factors of production are scarce? In what ways are the bowed-out shape of the production possibilities curve and the law of increasing opportunity cost related?

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CONFRONTING SCARCITY: CHOICES IN PRODUCTION

1. How does a college education increase one’s human capital?

2. Why does the downward-sloping production possibilities curve imply that factors of production are scarce?

3. In what ways are the bowed-out shape of the production possibilities curve and the law of increasing opportunity cost related?

4. What is the relationship between the concept of comparative advantage and the law of increasing opportunity cost?

5. Suppose an economy can produce two goods, A and B. It is now operating at point E on production possibilities curve RT. An improvement in the technology available to produce good A shifts the curve to ST, and the economy selects point E′. How does this change affect the opportunity cost of producing an additional unit of good B?

6. Could a nation’s production possibilities curve ever shift inward? Explain what such a shift would mean, and discuss events that might cause such a shift to occur.

7. Suppose blue-eyed people were banned from working. How would this affect a nation’s production possibilities curve?

8. Evaluate this statement: “The U.S. economy could achieve greater growth by devoting fewer resources to consumption and more to investment; it follows that such a shift would be desirable.”

9. Two countries, Sportsland and Foodland, have similar total quantities of labor, capital, and natural resources. Both can produce two goods, figs and footballs. Sportsland’s resources are particularly well suited to the production of footballs but are not very productive in producing figs. Foodland’s resources are very productive when used for figs but are not capable of producing many footballs. In which country is the cost of additional footballs generally greater? Explain.

10. Suppose a country is committed to using its resources based on the reverse of comparative advantage doctrine: it first transfers those resources for which the cost is greatest, not lowest. Describe this country’s production possibilities curve.

11. The U.S. Constitution bans states from restricting imports of goods and services from other states. Suppose this restriction did not exist and that states were allowed to limit imports of goods and services produced in other states. How do you think this would affect U.S. output? Explain.

12. By 1993, nations in the European Union (EU) had eliminated all barriers to the flow of goods, services, labor, and capital across their borders. Even such things as consumer protection laws and the types of plugs required to plug in appliances have been standardized to ensure that there will be no barriers to trade. How do you think this elimination of trade barriers affected EU output?

13. How did the technological changes described in the Case in Point “Technology Cuts Costs, Boosts Productivity and Profits” affect the production possibilities curve for the United States?

Explain what is meant by the opportunity cost of a choice. What is the approximate dollar cost of the tuition and other fees associated with the economics course you are taking? Does this dollar cost fully reflect the opportunity cost to you of taking the course?

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PRINCIPLES OF MICROECONOMICS


1. Why does the fact that something is scarce require that we make choices?
2. Does the fact that something is abundant mean it is not scarce in the economic sense? Why or why not?
3. In some countries, such as Cuba and North Korea, the government makes most of the decisions about
what will be produced, how it will be produced, and for whom. Does the fact that these choices are made
by the government eliminate scarcity in these countries? Why or why not?
4. Explain what is meant by the opportunity cost of a choice.
5. What is the approximate dollar cost of the tuition and other fees associated with the economics course
you are taking? Does this dollar cost fully reflect the opportunity cost to you of taking the course?
6. In the Case in Point essay “The Rising Cost of Energy,” what would be some of the things that would be
included in an estimate of the opportunity cost of preserving part of northern Alberta Canada by
prohibiting heavy crude oil extraction? Do you think that the increased extraction represents the best use
of the land? Why or why not?
7. Indicate whether each of the following is a topic of microeconomics or macroeconomics:
a. The impact of higher oil prices on the production of steel
b. The increased demand in the last 15 years for exotic dietary supplements
c. The surge in aggregate economic activity that hit much of Asia late in the early 2000s
d. The sharp increases in U.S. employment and total output that occurred between 2003 and 2007
e. The impact of preservation of wilderness areas on the logging industry and on the price of
lumber
8. Determine whether each of the following raises a “what,” “how,” or “for whom” issue. Are the statements
normative or positive?
a. A requirement that aluminum used in cars be made from recycled materials will raise the price of
automobiles.
b. The federal government does not spend enough for children.
c. An increase in police resources provided to the inner city will lower the crime rate.
d. Automation destroys jobs.
e. Efforts to improve the environment tend to reduce production and employment.
f. Japanese firms should be more willing to hire additional workers when production rises and to
lay off workers when production falls.
g. Access to health care should not be limited by income.
9. Your time is a scarce resource. What if the quantity of time were increased, say to 48 hours per day, and
everyone still lived as many days as before. Would time still be scarce?
10. Most college students are under age 25. Give two explanations for this—one based on the benefits
people of different ages are likely to receive from higher education and one based on the opportunity
costs of a college education to students of different ages.
11. Some municipal water companies charge customers a flat fee each month, regardless of the amount of
water they consume. Others meter water use and charge according to the quantity of water customers
use. Compare the way the two systems affect the cost of water use at the margin.
12. How might you test each of the following hypotheses? Suggest some problems that might arise in each
test due to the ceteris paribus (all-other-things-unchanged) problem and the fallacy of false cause.
a. Reducing the quantity of heroin available will increase total spending on heroin and increase the
crime rate.
b. Higher incomes make people happier.
c. Higher incomes make people live longer.
13. Many models in physics and in chemistry assume the existence of a perfect vacuum (that is, a space
entirely empty of matter). Yet we know that a perfect vacuum cannot exist. Are such models valid? Why
are models based on assumptions that are essentially incorrect?
14. Suppose you were asked to test the proposition that publishing students’ teacher evaluations causes
grade inflation. What evidence might you want to consider? How would the inability to carry out
controlled experiments make your analysis more difficult?
15. Referring to the Case in Point “Baldness and Heart Disease,” explain the possible fallacy of false cause in
concluding that baldness makes a person more likely to have heart disease.
16. In 2005 the Food and Drug Administration ordered that Vioxx and other popular drugs for treating the
pain of arthritis be withdrawn from the market. The order resulted from a finding that people taking the
drugs had an increased risk of cardiovascular problems. Some researchers criticized the government’s
action, arguing that concluding that the drugs caused the cardiovascular problems represented an
example of the fallacy of false cause. Can you think of any reason why this might be the case

Why do tickets to the best concerts cost so much? How does the threat of global warming affect real estate prices in coastal areas? Why do women end up doing most of the housework? Why do seni- or citizens get discounts on public transit systems?

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Microeconomics and Macroeconomics


The field of economics is typically divided into two broad realms: microeconomics and macroeconomics. It is important to see the distinctions between these broad areas of study.
Microeconomics is the branch of economics that focuses on the choices made by individual decision-making units in the economy—typically consumers and firms—and the impacts those choices have on individual markets. Macroeconomics is the branch of economics that focuses on the impact of choices on the total, or aggregate, level of economic activity.

Why do tickets to the best concerts cost so much? How does the threat of global warming affect real estate prices in coastal areas? Why do women end up doing most of the housework? Why do seni- or citizens get discounts on public transit systems? These questions are generally regarded as microeconomic because they focus on individual units or markets in the economy.
Is the total level of economic activity rising or falling? Is the rate of inflation increasing or decreasing? What is happening to the unemployment rate? These are questions that deal with aggregates, or totals, in the economy; they are problems of macroeconomics. The question about the level of economic activity, for example, refers to the total value of all goods and services produced in the economy.

Inflation is a measure of the rate of change in the average price level for the entire economy; it is a macroeconomic problem. The total levels of employment and unemployment in the economy represent the aggregate of all labor markets; unemployment is also a topic of macroeconomics.
Both microeconomics and macroeconomics give attention to individual markets. But in microeconomics that attention is an end in itself; in macroeconomics it is aimed at explaining the movement of major economic aggregates—the level of total output, the level of employment, and the price level.
We have now examined the characteristics that define the economic way of thinking and the two branches of this way of thinking: microeconomics and macroeconomics. In the next section, we will have a look at what one can do with training in economics

Discuss: What does equilibrium price represent? What factors cause equilibrium to change and why is it important that prices are flexible in our economy? After reading about price ceiling and price floor, do you think the government should control the level of prices for products that are really important such as gasoline

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Equilibrium price

1. Provide examples of a variable that affect the supply curve and a variable that affects the demand curve (You must refer to the determinants of demand and supply in your textbook)

2. Think of a product or service that use in your everyday life or workplace. Describe how the supply or demand of this product might be changed. Which of the main categories of demand and supply factors presented in your textbook are involved?

3. Discuss: What does equilibrium price represent? What factors cause equilibrium to change and why is it important that prices are flexible in our economy? After reading about price ceiling and price floor, do you think the government should control the level of prices for products that are really important such as gasoline (read about price ceiling and price floor in your textbook before answering this item)

Write an essay Telling us about the areas of study you are excited to explore, and specifically why you wish to pursue them in our College.

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No citation for college admissions essay

Students in Arts and Sciences embrace the opportunity to delve into multifaceted academic interests, embodying in 21st century terms Ezra Cornell’s “any person…any study” founding vision. Tell us about the areas of study you are excited to explore, and specifically why you wish to pursue them in our College.*

What is the definition of price discrimination? In what instance is it illegal to do so? Then, provide two examples of price discrimination. In each case, explain why the monopolist chooses to follow this business strategy.

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Price discrimination

What is the definition of price discrimination? In what instance is it illegal to do so? Then, provide two examples of price discrimination. In each case, explain why the monopolist chooses to follow this business strategy.

Solve for the allocation of labor which would equate WC= WE, solve for the equilibrium weekly wage rate, and show your results on a labor allocation diagram.

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Coursework 1

Consider a standard Heckscher-Ohlin model of trade between the United States and the European Union, in which the only resources are capital (K) and labor (L), and the only goods are chemicals (C) and electronics (E), both produced under perfect competition, with constant returns to scale, diminishing marginal returns, identical technologies, and identical preferences, and no transportation costs.  The US is relatively capital abundant, and chemical production is relatively capital-intensive.

    1. Use an Edgeworth allocation box, with chemical production in the southwest origin and labor on the horizontal axis, to show that unless the isoquants are tangent – and explain what this means in economic terms – that any allocation is not Pareto optimal.
    2. In the Edgeworth allocation box, show how the movement from autarky to free trade affects the allocation of capital and labor in the long run between sectors, and how this affects both the wage-rental rate and the capital-labor ratios in each sector.
    3. In the above Edgeworth allocation box, show that if labor moves is mobile but capital is not then the resulting allocation is not Pareto Optimal in the long run.
    4. Use an Edgeworth distribution box, with the United States’ PPF in the southwest origin and the quantity of chemicals on the horizontal axis, to show how Pareto optimal distributions require that relative marginal costs equal relative prices equal relative marginal utilities, not just within a country but across countries.
    5. Does international trade cause faster economic growth and higher per-capita incomes, is it the other was around, or is there no significant correlation? Review the journal articles I attached. What are the main arguments for and against the causal connection between international trade, per-capita income, and economic growth? What does the research on the actual evidence, e.g., the meta-analysis by Lewer & van den Berg, prove or imply?

III. Consider the labor allocation problem for the specific factors model in the medium run. Assume that PC = $120, PE = $60, MPLC = 500 – LC/10, MPLE = 400 – LE/20, and LC + LE = 4000 persons per week.

  1. Solve for the allocation of labor which would equate WC= WE, solve for the equilibrium weekly wage rate, and show your results on a labor allocation diagram.
  2. Using the area method for the labor allocation graph, solve for the total gross profits (i.e., returns to capital) in each sector. Check your answers by solving for output of each (taking the integral of the MPL), multiply by price to get revenue, and subtract total wages to get profit.
  3. Suppose that PCfalls by half, to $60. Show this on your diagram.
  4. Assume that in the very short-run, after PCfalls, labor is immobile. How will wages change in each sector?
  5. Assume instead that wages are sticky in the very short-run, after PC What will happen to employment in each sector? What will be the temporary unemployment rate, as a percentage of the total labor endowment?
  6. Now assume that nominal wages are flexible and labor is mobile. Solve for the new labor allocation after PCfalls, and then solve for the new equilibrium wage rate, and the new amounts of total gross profits in each sector. By what percentage did each change, and how does this compare to the change in PC?

 

What is the value of net private domestic investment? Compute the GDP using the expenditures approach. Compute the GDP using the income (value added) approach.

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Principles of Economics

ECONOMICS 200 PRINCIPLES OF MAETITTECONOMR.5
NATIONAL INCOME AND PRODUCT
All figures in billions of dollars
Net income payments to the rest of the world.$0 Personal consumption expenditures $ 11,650 Government purchases ..3,150 Depreciation allowances 2,650 Personal taxes • 1,610 Rents 600 Imports 2,800 Exports 2,300 Taxes on production and imports 1,150 Net interest. 450 Proprietors’ income 1,300 Gross private domestic investment 2,850 Employee compensation 8,900 Corporate profits.. 2,100
Note: There-may be information in the table that is not used in this problem.

1. Compute the GDP using the expenditures approach. Clearly shov■i hmti you arrived at your answer in the space below:
2. Compute the GDP using the income (value added) approach.
Clearly show how you arrived at your answer in the space below:
3. What is the value of net private domestic investment?

Was the economic and political vision behind the reform initiative known as the New International and Economic Order compatible with the prevailing Bretton Woods order?

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New International and Economic Order and The Bretton Woods Order

Was the economic and political vision behind the reform initiative known as the New International and Economic Order compatible with the prevailing Bretton Woods order? Yes, or No? State why you agree or disagree.

 

What is the slope saying about the two variables? Write the equation that represents the line? What would predict saving to be at the $12,500 level of income?

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Homework 1

The following table contained data on the relationship between saving and income:
Income Per Year Saving Per Year
$15,000 $1,000
0 – 500
10,000 500
5,000 0
20,000 1,500
a) Rearrange the data into a meaningful order (Hint start with 0 and – 500).
b) Graph them on a piece of paper.
c) Calculate the slope of the line that you have graphed.
d) What is the slope saying about the two variables?
e) Write the equation that represents the line.
f) What would predict saving to be at the $12,500 level of income