Archive

Archive for December, 2015

Tragedy of the Commons

December 26, 2015 Leave a comment

And a great video with real-life cases:

Categories: Microeconomics, Videos

More on Externalities

December 26, 2015 Leave a comment

Milton Friedman argues that government isn’t always the best answer to market failure, because of the possibility of “government failure”:

His example (at 5:10), of Tris being used in children’s sleepwear to make them flame-retardant, was especially relevant to me. I was a child when this happened, and remembered wearing “flame-retardant” pajamas.

I find many of my students have an innocent, almost naive faith in the goodness of governments as opposed to businesses. They assume governments act in the interest of the people, and businesses act in their own interest.

 

Categories: Microeconomics, Videos

Class Video: Externalities

December 26, 2015 Leave a comment

Categories: Microeconomics, Videos

Heh

December 15, 2015 Leave a comment

Categories: Microeconomics

Practice Problem

December 14, 2015 2 comments

after tariff

The domestic country is Krakosia.

Before trade is allowed

The domestic equilibrium price of carnations is $_______ and the equilibrium quantity is _______.

Consumer surplus in Krakosia is $_______.

Producer surplus in Krakosia is $_______.

The world equilibrium price of carnations is $________.

World equilibrium quantity is, of course, not shown on this graph.

After trade is allowed (but before the tariff is imposed)

Will Krakosia become an importer or exporter of carnations?

Krakosian producers will make and sell ______ carnations at a price of $______.

Krakosian consumers will buy _______ carnations at a price of $____.

The difference between the domestic consumption and production of carnations is ______ carnations. What is this difference called?

Consumer surplus in Krakosia is now $______.

Producer surplus in Krakosia is now $_______.

Total surplus in Krakosia is now $_______.

Is this an increase or decrease? How much?

Deadweight loss from trade is $________.

Tax revenue from trade is $_____.

Who will be hurt by trade, Krakosian consumers or producers?

Now assume trade is allowed but a tariff is imposed

Will Krakosia now import or export carnations?

Krakosian producers will make and sell _________ carnations at a price of $______.

Krakosian consumers will buy _____________ carnations at a price of $__________.

The difference between the domestic consumption and the domestic production of carnations is _________ carnations.

Consumer surplus in Krakosia is now $_______.

Producer surplus in Krakosia is now $_______.

Total surplus in Krakosia is now $___________.

Is this an increase or decreasein total surplus with trade but before the tariff? How much?

Deadweight loss resulting from the tariff is $_______.

Tax revenue resulting from the tariff is $_________.

Who will be hurt by the tariff, Krakosian consumers or producers?

Categories: International Trade

Class Video: Why Do Countries Restrict Trade?

December 10, 2015 Leave a comment

Categories: Videos

One of These Things Is Not Like the Other

December 2, 2015 Leave a comment

Cars, milk, gasoline, government-delivered mail…three of these things cost less (measured in price/hourly wage terms) than they did in 1957. One costs more.

Guess which one costs more.

(If you don’t understand the origin of “One of These Things Is Not Like the Other,” here’s a classic Sesame Street example.)

Categories: Microeconomics