Problem Set 2 1

Topics: Supply and demand, Employment, Graham cracker Pages: 2 (487 words) Published: August 1, 2015
﻿Problem Set 2
Name: __________________________________________

Problem Set 2 is to be completed by 11:59 p.m. (ET) on Monday of Module/Week 4.

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.

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...