Problem Set 2
Problem Set 2 is to be completed
by 11:59 p.m. (ET) on Monday of Module/Week 4.
following table presents data for wages in the market for internet security
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.)
the equilibrium wage? ___________________________________
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
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?
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?
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