Essay on Mid Term

1514 Words May 30th, 2011 7 Pages
1. Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

Maximum annual output options Quantity of potatoes Quantity of fish (pounds) (pounds)
A 1,000 0
B 800 300
C 600 500
D 400 600
E 200 650
F 0 675

a. Examine the Maximum annual output
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(hint: use the 10 question Worksheet approach) Explain your analysis and answer these two questions.

What will happen to the price at which fishermen can sell lobster?

What will be the final output of lobsters? (15 points)

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d. What will happen to the price paid by U.S. consumers? What will happen to the quantity consumed by U.S. consumers? (10 Points)

4. As noted in the text, European governments tend to make greater use of price controls than does the American government. For example, the French government sets minimum starting yearly wages for new hires who have completed le bac, certification roughly equivalent to a high school diploma. The demand schedule for new hires with le bac and the supply schedule for similarly credentialed new job seekers are given in the accompanying table. The price here—given in euros, the currency used in France—is the same as the yearly wage.

Quantity demanded Quantity supplied

Wage (new job offers (new job seekers

(per year) per year) per year)

€45,000 200,000 325,000

€40,000 220,000 320,000

€35,000 250,000 310,000

€30,000 290,000 290,000

€25,000 370,000 200,000

a. In the absence of government interference, what is the equilibrium wage and number of graduates hired per year? (Also see the diagram) Will there be anyone seeking a job at the equilibrium wage who will be unable to find one— that is, will there be

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