Question 2. Short answers. Use graphs where appropriate.

1. Explain why is the short run labor demand curve less elastic relative to the long run labor demand curve. (7.5 points)

2. How would imposing a minimum wage above the market-clearing wage affect employment in a competitive labor market? Use a graph to illustrate this. (7.5 points)

3. Many immigrants and many American high school dropouts possess very few skills. What impact will these low-skill immigrants likely have on the labor market opportunities of American high school dropouts? (7.5 points)

4. Comment on this statement: “If we deported all undocumented persons who are now in the United States, our total national unemployment would decline by the same number of people.” (7.5 points)

Market Structure and the Determination of Market Price
To prepare for this Discussion:

• Identify an example of a health care good or service to explore for this Discussion. The following list of submarkets may guide your consideration, but you may select an example from a different area.
  • Physician services
  • Nursing services
  • Medical technician services
  • Physical facilities (e.g., hospitals, specialized, imaging, long-term care)
  • Medical technology
  • Pharmaceuticals

By Day 4, post a cohesive response that addresses the following:

• Describe an example of a particular health care good or service at the beginning of your posting.
• Analyze how you could shift the supply curve or the demand curve to affect the market price for your selected example.
• Evaluate the impact of two or three factors that could influence the extent to which the supply curve or demand curve could be shifted (e.g., competition, monopoly, availability of substitutes, production inputs and costs).

1. What is electronic data interchange? What are its major applications in commerce?
2. What are vertical disintegration? Please provide an example for each.

Match the industry structure to the description.

Please answer the two questions below separately:

1. Describe three different barriers to entry that could lead to monopoly power in an industry

2. Describe the circumstance(s) under which a monopolist could suffer an economic loss

The average per Growth Rates of Real, per capita GDP between 2000 and 2008 in Low-income and Middle-income countries where 4.7% and 6.1% respectively. This observation is consistent with the Convergence hypothesis.

Consider Bertrand Competition with demand curve P = 56 − 2 Q. There are two firms. Firm 1 has MC=12. Firm 2 has MC=8. What is the equilibrium number of units transacted in this market (Round to the nearest integer)?

Using a specific numerical example explain the statement that "given the return on assets, the lower the bank capital, the higher the return for the owners of the bank."

Answer the questions below using the following equations for supply and demand where Q is the number of computers and P is the price per computer.

QD (P) = 60 - 2P

C(Q) = 15Q

a. Suppose the government determines that a fee of $2 per computer will be implemented to cover pollution externalities in production. What will be the price and quantity under perfect competition? Under monopoly?

b. Do consumers LOSE more surplus from the $2 fee under monopoly or under perfect competition? Calculate the differences under perfect competition and monopoly and compare.

Use the following table to answer the question.

Assume Dave consumes 40 pounds of green beans and 80 pounds of corn without trade. Also, assume that Simon consumes 80 pounds of green beans and 40 pounds of corn without trade. Suppose Simon and Dave specialize and that the terms of trade are 1 pound of green beans for 1 pound of corn. If Simon sells Dave 80 pounds of green beans, then the gains from trade for Dave are ________ pounds of green beans and ________ pounds of corn with trade and specialization.

Group of answer choices

0, 40

20, 20

40, 40

40, 0

A number of developing countries have accumulated a considerable volume of external debt. In this question, we examine the impact on the terms of trade of the developing countries that would result from repaying part of this debt. For the purposes of this question, suppose that developing countries will pay $300 billion to the industrial countries over the next decade. In addition, assume that this is a transfer. Suppose that the developing countries export raw materials and basic manufactures (“basic goods”) and that the industrial countries export advanced manufactures (“advanced goods”). Spending patterns differ in these two groups of countries. In the developing countries 70 cents of each dollar of spending is allocated to basic goods and 30 cents out of each dollar is allocated to advanced goods. In the industrial countries, the spending pattern is reversed (70% on advanced goods and 30% on basic goods).

a) What is the effect of a $300 billion transfer on world demand for advanced goods?

b) What is the effect of a $300 billion transfer on world demand for basic goods?

c) Using your answers to the first two parts of this question, please determine whether the relative demand curve shifts left or right. Please let the developing countries be the “home country”. Will the terms of trade of trade of the developing countries improve or worsen? Some have argued that, if the developing countries are to generate the surpluses that will facilitate the transfer, the relative price of their exports must fall—their terms of trade must worsen. If so, that would place a “secondary burden” on the developing countries over and above the burden of repaying their debt. Is the concern a valid one in this instance?

d) How would your answers differ if the spending patterns were reversed for the two countries? Repeat the questions with industrial countries spending 30% on advanced goods and 70% on basic goods and developing countries spending 70% on advanced goods and 30% on basic goods.

Q1.        Amos McCoy is currently raising corn on his 100-acre farm and earning an accounting profit of $100 per acre. However, if he raised soybeans, he could earn $200 per acre. Is he currently earning an economic profit? Why or why not?

Economic profit = Accounting profits minus implicit costs (opportunity costs).

Q3.      Calculate the accounting profit or loss as well as the economic profit or loss in each of the following situations:

1. A firm with total revenues of $150 million, explicit costs of $90 million, and implicit costs of $40 million.
2. A firm with total revenues of $125 million, explicit costs of $100 million, and implicit costs of $30 million.
3. A firm with total revenues of $100 million, explicit costs of $90 million, and implicit costs of $20 million.
4. A firm with total revenues of $250,000, explicit costs of $275,000, and implicit costs of $50,000.

Q5.      What distinguishes a firm’s short-run period from its long-run period?

Q7.      What is the difference between fixed cost and variable cost? Does each type of cost affect short-run marginal cost? If yes, explain how each affects marginal cost. If no, explain why each does or does not affect marginal cost.

Q8.      Explain why the marginal cost of production must increase if the marginal product of the variable resource is decreasing.

Q10.    Identify each of the curves in the following graph.

Q11.    Explain why the marginal cost curve must intersect the average total cost curve and the average variable cost curve at their minimum points. Why do the average total cost and average variable cost curves get closer to one another as output increase?

Q12.    In Exhibit 7 in this chapter, the output level where average total cost is at a minimum is greater than the output level where average variable cost is at a minimum. Why?         

Q14.    Explain the shape of the long-run average cost curve. What does “minimum efficient scale” mea

P19.     Complete the following table, where L is units of labor Q is units of output, and MP is the marginal product of labor.

1. At what level of labor input do the marginal returns to labor begin to diminish?
2. What is the average variable cost when Q = 24?
3. What is this firm’s fixed cost?
4. What is the wage rate per day?

P20.     Assume that labor and capital are the only inputs used by a firm. Capital is fixed at 5 units, which cost $100 each. Workers can be hired for $200 each. Complete the following table to show average variable cost (AVC), average total cost (ATC), and marginal cost (MC).

P21.     Suppose the firm has only three possible scales of production as shown below:

1. Which scale of production is most efficient when Q= 65?
2. Which scale of production is most efficient when Q =75?
3. Trace out the long-run average cost curve on the diagram.

Chapter Appendix  ‘Production and Cost in the Firm’ - Extra Credit

P1.       Suppose that a firm’s cost per unit of labor is $100 per day and its cost per unit of capital is $400 per day.

1. Draw the isocost line for a total cost per day of $2,000. Label the axis.
2. If the firm is producing efficiently, what is the marginal rate of technical substitution between labor and capital?
3. Demonstrate your answer to part (b) using isocost lines and isoquant curves.

Referring to the Case in Point on targeting, what difference does it make whether the target is the inflation rate of the past year or the expected inflation rate over the next year?

The four requirements for an enforceable contract