Bu204 Macroeconomics Unit 2 Assignment

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  • Topic: Economics, Production-possibility frontier, Opportunity cost
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  • Published : October 21, 2012
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Renea Frymoyer
BU204
01
September 29, 2012



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?

Positive statements are “claims that attempt to describe the world as it is” (Mankiw, 2011, p. 31). Normative statements are “claims that attempt to prescribe how the world should be” (Mankiw, 2011, p. 31).

Positive statements
* 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. Normative statements
* In order to preserve the dignity of the American workplace, the government should enact legislation banning imports of low-wage Asian clothing.

b. Would such a policy make some Americans better off without making any other Americans worse off? Explain who, and why. “In order to preserve the dignity of the American workplace, the government should enact legislation banning imports of low-wage Asian clothing.” Sweatshops once existed in the United States. With the accumulation of capital, technology was developed and implemented; workers became more educated, productive and their income increased; and working conditions improved (Hendrickson, 2006). This is the process of economic development. The explosion of sweatshops abroad has led to the decline of the apparel industry in the United States (Hendrickson, 2006). Economists are known to have conflicting views due to differences in values and perceptions (Mankiw, 2011, p. 34-35). Economist Josh Hendrickson believes it is in the best interest of Americans to import garments at lower cost because it allows the United States to focus capital and educated and skilled labor on ventures and enterprises that increase the standard of living and overall wealth of our country (2006). The United States has an absolute advantage in producing apparel and the opportunity cost is higher. Conversely, third-world countries with sweatshops have a comparative advantage and the opportunity cost is lower (Mankiw, 2011, p. 54-56). In regards to the preservation of dignity, sweatshops offer jobs where none existed before. Voluntary sweatshop workers are generally paid well in comparison to many in their country. The concern really should be for those who have jobs that pay less with worse working conditions and for those who have no job (Hendrickson, 2006). The standard of living in the locality of sweatshops increases. United States workers are incited to become educated and work hard to obtain high paying jobs. The majority do not feel in competition with third-world sweatshop workers.

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

Without a doubt, low-wage Asian workers would not benefit from such a policy. First, due to the difference in economic development and the standard of living, we cannot compare wages in the United States with (sweatshop) wages in third-world countries. Asian sweatshops generally offer their workers higher wages and acceptable working conditions. Because the work is manual, hours are long and productivity is low. Realizing that many have jobs with lower wages and worse working conditions or no jobs at all (Hendrickson, 2006), voluntary sweatshop workers are glad to have their jobs and enjoy a higher standard of living.

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...
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