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PROBLEM SET 2 ECON 213

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Question;Problem Set;2;1.;The;following table presents data for wages in the market for internet security;professionals.;(HINT;in the labor market the roles are reversed. Those who want to hire labor are;the demanders. The workers enter the work force providing labor to the market;place so they are the suppliers.);Wage;Quantity;Demanded;Quantity;Supplied;$50,000;20,000;14,000;$60,000;18,000;18,000;$70,000;16,000;22,000;$80,000;14,000;26,000;$90,000;12,000;30,000;What;is the equilibrium wage?;Now;consider this scenario: Due to an increase in the internet security threats;the government wants to apply a price control in this market to encourage more;people to become internet security professionals. Assume that a wage control is;set at $75,000. Will this increase the number of people entering this labor;market? Why or why not? Will this increase the number of people hired? Why or;why not?;2.;Assume;you are a policymaker in Washington DC. Lobbyists for the preschoolers of;America have put pressure on their representatives to cap prices on graham;crackers. You have been assigned a position on a new committee to study the;impact of a price ceiling on graham crackers.;Your;job is to;a.);Illustrate;using a fully labeled supply and demand graph (label all the axes and any lines;you put in your graph) what such an artificial price looks like.;b.);Explain;what the results of such a move are for the graham cracker market. In other;words, will there be a SHORTAGE, a SURPLUS, or neither created? Why?;3.;Pollution;is considered by most a negative externality. Some economists would like to see;the costs of these burdens incorporated into the price of goods that we buy. For;instance, since coal fire power plants increase emissions that could;potentially lead to climate change, these economists believe that the price we;pay for electricity is not adequately high enough. Draw a completely labeled;graph and illustrate on the graph how much higher electricity prices would be;if the full costs of electricity production were taken into account. You do not;need to provide actual numbers, rather, show on the price axis where the price;would be before the externality is considered and the price after the;externality is included. What problems might exist in determining this new;externality based, price?;4.;In;the old days lighthouses were built along the coast to prevent ships from;running aground on rocks in unfamiliar ports. By shining a beam of light over a;port and guiding ships away from rocks, these vital buildings reduced the risk;for ship captains and were generally considered to be extremely valuable;resources. Curiously, lighthouses were almost always run and maintained by;local governments. Explain in economic terms why private firms would not run a;lighthouse.

 

Paper#57686 | Written in 18-Jul-2015

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