Problem Set 2

Topics: Supply and demand, Externality, Lighthouse Pages: 4 (922 words) Published: September 28, 2014
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? _$60,000_________________________ 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? It will increase the number of people entering this labor market because of the increase of pay from the equilibrium will be enticing, but this will cause a shortage in the labor market. Because the number of people entering this labor market has increased, there will not be enough positions for them. Due to this, the number of people hired will decrease. Also, another factor to take into account is the budget for the companies for these positions. If the equilibrium is set at $60,000 the company might not be in a position to increase the pay rate to accommodate the price control, thus causing them not to be able to fill those positions.

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...
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