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Microeconomics Take Home Excercise Answers

November 26, 2012 Leave a comment

Here are the answers to the take-home questions given in class:

Question 1:

a.    $12
b.    50
c.    $15
d.    30
e.    $250
f.    $122.50
g.    $250
h.    $422.50
i.    $500
j.    $545
k.    $45

Question 2:

a.    $6, 84
b.    66
c.    44
d.    $384
e.    $294
f.    $45
g.    $80
h.    $44
i.    $11

Question 3:

  1. National security argument vs. “what’s really important for national security?”
  2. Infant industry argument vs. “can government pick winners and losers better than the market?” and “how long will it need to be protected?”
  3. Unfair competition argument vs. “why not let their taxpayers subsidize our consumers?”
  4. Jobs argument vs. long-run benefits of moving people to more productive work
  5. Bargaining-chip argument vs. “what if it doesn’t work?”
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Categories: Uncategorized

Median Voter Theorem and the 2012 Election

November 21, 2012 Leave a comment

Something for my Intermediate Micro students to analyze as we cover median voter theorem this week: a popular President wins reelection with 50.75% of the vote. Click on the graphic for the numbers.

Categories: Uncategorized

Stolper-Samuelson Says That?

November 19, 2012 Leave a comment

Public Citizen objects to any positive read on the NBER study that shows NAFTA has brought a small increase in real wages to U.S. workers, citing “standard trade theory”:

…the Stolper-Samuelson effect predicts that open trade will create increased demand for U.S. capital-intensive goods and reduced demand for U.S. labor-intensive goods, thereby increasing income for capital owners (i.e. the wealthy) while reducing wages for workers.  Under NAFTA, this regressive impact has moved from theory to reality.

In fact, the Stolper-Samuelson effect predicts that under certain conditions the owners of the factor of production used intensively will benefit more from trade than the owners of a factor that is relatively more scarce. It doesn’t say that open trade will create increased demand for U.S. capital intensive goods (that’s a function of relative capital abundance in the U.S. and the industries that produce goods that use capital intensively).

The Public Citizen post is all the more curious for bemoaning the loss of tariff revenue to the governments, but ignoring completely the reduction to deadweight loss associated with tariffs in “standard trade theory” as well as the improvement in aggregate economic welfare that comes when people are free to buy and sell to whomever they wish to, without some government stopping them in order to favor certain producers.

Looks like standard trade theory only works for Public Citizen when it suits their ideological purpose of furthering a “trade is bad for U.S. workers” meme.

Finally, a question. Let’s assume NAFTA is bad for U.S. workers because trade disproportionally benefits the owners of the factor used in the production of goods for which the U.S. is relatively abundant in (capital, in this case). Further, assume the U.S. government negotiated this in the interest of capital owners–and at workers’ expense.

So…who benefits in Mexico? Is the government of Mexico less beholden to the interest of capital owners? Because if Public Citizen is going to invoke Stolper-Samuelson, it should be ready to accept that the main beneficiaries of trade in Mexico would be workers, since presumably Mexico has comparative advantage in goods that intensively use the factor for which it has relative abundance, and trade would increase capital to labor ratios in Mexico, and real returns to labor.

Is Public Citizen ready to admit that NAFTA must have been disproportionately good for workers in Mexico (or Canada for that matter)? And if so, why are capital owners especially powerful in controlling the U.S. government, but owners of capital in Mexico can’t seem to get deals negotiated in their interest?

Someone needs to go back and review “standard trade theory” and find out what the Stolper-Samuelson theorem means before using it to fit a “trade benefits the wealthy” story.

International Economics Midterm Scores

November 19, 2012 Leave a comment

Student Code: 69690; Points: 95.5; Grade: A
Student Code: 2243; Points: 89; Grade: A
Student Code: 5433; Points: 87; Grade: A
Student Code: 2009; Points: 84; Grade: A
Student Code: 1725; Points: 82.5; Grade: A
Student Code: 1519; Points: 81; Grade: A
Student Code: 9450; Points: 81; Grade: A
Student Code: 3106; Points: 79; Grade: A
Student Code: 5819; Points: 77.5; Grade: A
Student Code: 1728; Points: 72; Grade: A
Student Code: 3003; Points: 63; Grade: B
Student Code: 5510; Points: 61; Grade: B
Student Code: 2131; Points: 55; Grade: B
Student Code: 1900; Points: 53; Grade: B
Student Code: 291; Points: 50; Grade: B
Student Code: 19541; Points: 47.5; Grade: B
Student Code: 7857; Points: 47; Grade: B
Student Code: 1680; Points: 45; Grade: B
Student Code: 1112; Points: 42; Grade: B
Student Code: 2121; Points: 38; Grade: B
Student Code: 6688; Points: 35; Grade: B
Student Code: 3514; Points: 35; Grade: B
Student Code: 711; Points: 34; Grade: B
Student Code: 9192; Points: 32; Grade: C
Student Code: 1611; Points: 29; Grade: C
Student Code: 533; Points: 27; Grade: C
Student Code: 1413; Points: 24.5; Grade: C
Student Code: 3109; Points: 23; Grade: C
Student Code: 5271; Points: 23; Grade: C
Student Code: 666; Points: 23; Grade: C
Student Code: 6568; Points: 21; Grade: C
Student Code: 7722; Points: 20; Grade: C
Student Code: 3142; Points: 19; Grade: C
Student Code: 9752; Points: 16; Grade: C
Student Code: 1168; Points: 16; Grade: C
Student Code: 69691; Points: 16; Grade: C
Student Code: 407; Points: 15; Grade: C
Student Code: 6564; Points: 13.5; Grade: D
Student Code: 19540; Points: 13; Grade: D
Student Code: 1333; Points: 13; Grade: D
Student Code: 7007; Points: 12.5; Grade: D
Student Code: n/a; Points: 12; Grade: D
Student Code: 6207; Points: 11; Grade: D
Student Code: 1910; Points: 10; Grade: D
Student Code: 7958; Points: 10; Grade: D
Student Code: 8471; Points: 8; Grade: D
Student Code: 1592; Points: 7; Grade: D
Student Code: 1989; Points: 7; Grade: D
Student Code: 8010; Points: 7; Grade: D
Student Code: 0000; Points: 6; Grade: D
Student Code: 4202; Points: 6; Grade: D
Student Code: 6064; Points: 6; Grade: D
Student Code: 2505; Points: 6; Grade: D
Student Code: 9696; Points: 5; Grade: F
Student Code: 9229; Points: 4; Grade: F
Student Code: 8590; Points: 2; Grade: F

Categories: Uncategorized

New U.S. Oil and The Hecksher-Ohlin Model

November 15, 2012 Leave a comment

Something for my International Economics students to think about:

Stories like this one have big implications for world trade.

A recent report by the U.S. Government Accountability Office estimated that if half of the oil bound up in the rock of the Green River Formation could be recovered it would be “equal to the entire world’s proven oil reserves.”

Both the GAO and private industry estimate the amount of oil recoverable to be 3 trillion barrels.

“In the past 100 years — in all of human history — we have consumed 1 trillion barrels of oil. There are several times that much here,” said Roger Day, vice president for operations for American Shale Oil (AMSO).

The obvious one is in trade flows of the natural resources themselves.

The less obvious implication is how this will change relative endowments! What effect will that have on trade in goods for which energy is used intensively in production?

Even better: analyze the effects on, say, an oil exporters terms of trade.

Japan GDP Shrinking, Again

November 14, 2012 Leave a comment

If this keeps happening, we’ll have to redraw the Asian side of the GDP charts for sure:

Japan’s GDP fell an annualized 3.5 percent last quarter, the most since the earthquake and tsunami in early 2011, Cabinet Office data showed yesterday in Tokyo. Exports to Asia, Europe and the U.S. all slid, as did capital spending, according to the government agency.

Categories: Uncategorized

Microeconomics Midterm Results

November 13, 2012 Leave a comment

Student 7777, Score 41 Grade: A
Student 7730, Score 41 Grade: A
Student 1407, Score 38 Grade: A
Student 2290, Score 33 Grade: A
Student 1657, Score 33 Grade: A
Student 6563, Score 28 Grade: B
Student 1302, Score 28 Grade: B
Student 8549, Score 28 Grade: B
Student 3204, Score 27 Grade: B
Student 3037, Score 25 Grade: B
Student 8754, Score 25 Grade: B
Student 1832, Score 24 Grade: B
Student 2525, Score 22 Grade: B
Student 4695, Score 22 Grade: B
Student 1807, Score 22 Grade: B
Student 1422, Score 22 Grade: B
Student 2113, Score 21 Grade: B
Student 4999, Score 19 Grade: B
Student 4488, Score 17 Grade: B
Student 5729, Score 17 Grade: B
Student 0880, Score 17 Grade: B
Student 1912, Score 16 Grade: C
Student 5703, Score 16 Grade: C
Student 6464, Score 16 Grade: C
Student 6507, Score 15 Grade: C
Student 1824, Score 15 Grade: C
Student 3012, Score 14 Grade: C
Student 2410, Score 14 Grade: C
Student 2626, Score 14 Grade: C
Student 1994, Score 14 Grade: C
Student 0069, Score 13 Grade: C
Student 5394, Score 13 Grade: C
Student 5115, Score 13 Grade: C
Student 7557, Score 13 Grade: C
Student 1992, Score 12 Grade: C
Student 1725, Score 12 Grade: C
Student 3637, Score 12 Grade: C
Student 1105, Score 12 Grade: C
Student 2239, Score 12 Grade: C
Student 0272, Score 10 Grade: C
Student 7477, Score 10 Grade: C
Student 9999, Score 9 Grade: C
Student 5559, Score 9 Grade: C
Student 0307, Score 9 Grade: C
Student 1234, Score 6 Grade: D
Student 2044, Score 6 Grade: D
Student 1310, Score 5 Grade: D
Student 1507, Score 5 Grade: D
Student 1963, Score 5 Grade: D
Student 1012, Score 4 Grade: D
Student 5324, Score 4 Grade: D
Student 2908, Score 3 Grade: D
Student 0524, Score 1 Grade: F
Student 2012, Score 1 Grade: F
Student 3116, Score 0 Grade: F
Student 6710, Score -2 Grade: F

Categories: Uncategorized