Archive for November, 2011

Answers to Take Home Assignment: Costs of Production

November 30, 2011 Leave a comment

1. $17,000

2. $2.43

3. $4

4. $6.43

5. $-3,000

6. $2

7. $60

8. $35

9. $110

10. $1,000

11. Economies of scale

12. $80,500

13. profit

14. 11 units of output

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Brazil Goes Backwards

November 12, 2011 Leave a comment

Brazil’s car industry is far less efficient than other nations’, so how is Brazil dealing with it? By improving infrastructure? Removing tariffs on products used to make cars? Allowing resources to be used in other industries where it has a competitive advantage?

Sadly, none of the above. Rather than face these inefficiencies, Brazil has chosen to raise tariffs on imported automobiles.

This kind of thinking represents everything wrong with protectionism: “Mr Mantega says Brazil is “under siege” from imports.”

Really? Under siege? Brazillians are being forced against their will to buy Chinese automobiles?

The last time I checked, people who buy imports do so voluntarily.

What if he spoke more honestly about what’s happening in Brazil? Do you think we’ll ever hear a government official say something like,

The truth is, our local auto makers produce an inferior product. No Brazillian would pay more for a car just because it was made in Brazil–people want good quality at a low price. So, to protect our inefficient automobile industry, ever car buyer in Brazil must suffer. They will all pay more, whether they buy a locally-made car or an import. We’re going to force a huge transfer of money from millions of ordinary Brazilians to the Brazilian auto industry. Too bad for everyone who wants to buy a new car.

Don’t hold your breath.

Categories: Uncategorized