Economics

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Answer the questions please from why nation fails book for the first 7 questions and the reading file for the last question .

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ECNS 251 Discussion Questions Why Nations Fail, Chapter 2 “Theories that Don’t Work” 1. In the first section of the chapter (The Lay of the Land), the authors note that Saudi Arabia and Kuwait are exceptions to the general pattern of relatively low income levels in other Middle East countries. Why? How does this help and hurt these two countries? 2. In the first section of the chapter, the authors note that the income gaps between countries were relatively small and stable before the industrial revolution. How did the industrial revolution play a role in generating income gaps across countries? 3. What is appealing about the “geography hypothesis” for explaining income gaps across countries? Why do the authors dismiss it as a consistent cause of income gaps? 4. What criteria, process, or logic do the authors utilize for dismissing the geography hypothesis? Is this process valid? 5. Is disease a cause or consequence of poverty? Why? 6. What characteristics does the “culture hypothesis” focus on? Do they provide convincing explanations for differences is economic growth? 7. What is the “ignorance hypothesis”? Does it provide convincing explanations for differences is economic growth? Country Production per month Shtark 200 arrows or 600 bows Tzargaryen 125 arrows or 250 bows 1. The table above shows the production possibilities for two countries, Shtark and Tzargaryen, which produce bows and arrows. For simplicity, assume constant opportunity costs. a. b. c. d. What is the opportunity cost of producing one arrow in Shtark? Tzargaryen? Which country has absolute advantage in producing arrows? Bows? Which country has comparative advantage in producing arrows? Bows? Which of the following trades would be possible and would make both countries better off? Why? i. ii. Shtark trades away 200 bows for 50 arrows from Tzargaryen Shtark trades away 50 bows for 75 arrows from Tzargaryen iii. iv. Shtark trades away 125 bows for 50 arrows from Tzargaryen Shtark trades away 125 arrows for 75 bows from Tzargaryen 2. American and Taiwanese workers can each produce 8 cars per year. An American worker can produce 20 tons of grain per year, whereas a Taiwanese worker can produce 10 tons of grain per year. Assume that each country has 100 million workers. a. For the United States, what is the opportunity cost of a car? Of grain? For Taiwan, what is the opportunity cost of a car? Of grain? b. Which country has absolute advantage in producing cars? In producing grain? c. Which country has comparative advantage in producing cars? In producing grain? d. Suppose that without trade, half of each country’s workers produce cars and half produce grain. What quantities of cars and grain does each country produce per year? e. Starting from a position without trade, give an example in which trade makes each country better off. Illustrate this using PFF diagrams for each country. 3. In the country of Myrontopia, there are two office supply companies, Dumber Mifflen and Mikel Scoot Paper Co. At Dumber Mifflen, it takes two workers to produce 30 reams of paper per hour and it takes three workers to produce 30 bobbleheads per hour. At Mikel Scoot Paper Co., it takes one worker to produce 20 reams of paper per hour and it takes two workers to produce 10 bobbleheads per hour. a. What is the price of bobbleheads (in terms of paper) for Dumber Mifflen? What is the price of a bobbleheads for Mikel Scoot Paper Co.? (Hint: a common unit of comparison across the firms and products is how much one worker can produce per hour) b. Which company has an absolute advantage in the production of each item? Which company has a comparative advantage in the production of each item? c. If the companies trade with each other, which item will each trade? d. What is the range of prices at which trade can occur? 4. Are the following statements true or false? Explain in each case. a. “Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.” b. “Certain very talented people have a comparative advantage in everything they do.” c. “If a trade is good for one person, it can’t be good for the other person.” d. “If a certain trade is good for one person, it is always good for the other one.” e. “If trade is good for a country, it must be good for everyone in the country.” 5. Consider the markets for staples, staplers, and paper clips. For each pair of goods listed below, identify whether the goods are complements or substitutes for consumers and use a graph of the second good’s market to demonstrate graphically how an increase in the price of the first good listed will affect the market for the second good listed. a. Staples and staplers b. Staples and paper clips c. Staplers and paper clips 6. Suppose a technological advance reduces the cost of manufacturing staplers. Draw a diagram to show what happens in the market for staplers. Explain the changes in equilibrium price and quantity that occur. 7. A survey shows an increase in viewership for Game of Thrones among young people. When discussing this in your weekly Game of Thrones Fanclub meeting, the two explanations below are proposed. Use supply-and-demand diagrams to show how each of these hypotheses could lead to an increase in viewers of Game of Thrones, and explain your diagrams. How could information on what has happened to the price of Game of Thrones help us to distinguish between these explanations? a. There has been an increases in the number of free streaming websites for Game of Thrones. b. Due to budgetary cutbacks from fighting a lengthy court cases, Commissioner Dodger Badell has cancelled Sunday Night Football, which aired at the same time as Game of Thrones and was also popular among young people. 8. Suppose that the price of New England Patriots football game tickets is determined by market forces. Currently, the demand and supply schedules are as follows: Price ($ per ticket) 40 Quantity Demanded (tickets per game) 100,000 Quantity Supplied (tickets per game) 80,000 80 120 160 200 80,000 60,000 40,000 20,000 80,000 80,000 80,000 80,000 a. Draw the demand and supply curves. What is unusual about this supply curve? Why might this be true? b. What is the equation for the demand curve (in the form of Qd = f(P))? The supply curve? c. What are the equilibrium price and quantity of tickets? d. Due to immigration, 5,000 people move to New England. The new citizens have the demand schedule below. Add the old demand schedule and the new citizens’ demand schedule to find the new combined total demand schedule for the entire region. What is the equation for the new demand curve (in the form of Qd = f(P))? Price ($ per ticket) 40 80 120 160 200 Quantity Demanded (tickets per game) 5,000 4,000 3,000 2,000 1000 e. What will be the new equilibrium price and quantity? 9. Market research has revealed the following information about the market for chocolate bars: The demand schedule can be represented by the equation QD= 1,600-300P, where QD is the quantity demanded per period and P is the price. The supply schedule can be represented by the equation QS= 1,400+700P, where QS is the quantity supplied per period. a. Calculate the equilibrium price and quantity in the market for chocolate bars. b. Suppose that chocolate is a normal good. Suppose also that chocolate consumers' incomes increase such that the quantity demanded of chocolate changes by 400 at each price. Compute the new equilibrium price and quantity for chocolate. c. Starting from the initial demand and supply, suppose that an increase in the cost of cocoa (an input in chocolate) causes the quantity supplied to change by 500 at each price. Compute the new equilibrium price and quantity of chocolate. 10. Read, "Blue-collar wages are surging. Can it last?" (The Economist, 11/14/2017) and answer the following: a. What impact would wages and salaries rising by 8.7% while prices increased by 9.5% have on the demand for normal goods and services? Inferior goods and services? Why? b. Which kind of shift (demand or supply or both) could explain the result that, "as unemployment has fallen from over 6$ in mid-2014 to just 4.1% today, wage growth has gradually picked up"? Explain your answer. c. The author notes that, "Whether male participation improves may depend on whether men are prepared to up sticks and move to where the labour market is booming." What impact would this kind of labor mobility have on wages in Texas and Oklahoma? On home prices in these areas?
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ECONOMIC 251 Discussion questions.
Quiz 1.
Kuwait and Saudi Arabia have low income levels due to poor economic development. The countries
which have not established clear strategies on development are likely to face constraint in improving
standard of their people. Poor economic development affects balance of payment and causes the
country to be poor ranked on global economic index. Kuwait and Saudi Arabia have not developed
inclusive economic institutions.
Quiz 2
Industrial revolution is a form of transition to new process in manufacturing and production industries.
Income gaps are reduced through introduction of new manufacturing process which are more efficient
than old machines deemed outdated. Industrial revolution helped people to gain financial freedom
through engaging in production activities. Employment opportunities helped to bridge gap in level of
income by distributing wealth across people.
Quiz 3
Geography hypothesis are assumptions concerning disparity in income distribution in some region of the
country. There are region which are deemed super rich hence developed while other regions are poorly
developed hence causing income gaps.
4. Quiz
The logic which author uses to address issue of Geographical hypothesis is to develop balanced
scorecard in which there is equal distribution of resources in all region without favoritisms. The process
can be valid if employees are engaged in the process.
Quiz 5.
Causes of poverty is attributed to poor planning and underutilization of the resources. The country
which fails to utilize its resources adequately is likely to fall into trap of poverty.
Quiz 6.
Culture hypothesis is engrained tendency where people have developed a particular way of doing things
and it has become part and parcel of their life. Characteristics of culture hypothesis include having a set
of beliefs in performing duties, set of determination in performing duties and mutual relationships.
Quiz. 7
Ignorance hypothesis is theory which explains lack of knowledge on how to utilize economic resources
available in the country. Many countries lark behind development due to ignorance on how utilize
available resources for economic gain. Ignorance hypothesis provides explanation why there is
economic disparity in some region hence imbalanced economic development.
Production possibility frontier.
Country

Production per month

Shtark
Tzargaryen

200 arrows or 600 bows
125 arrows or 250 bows
𝑐𝑜𝑠𝑡 𝑜𝑓 𝑤ℎ𝑎𝑡 𝑖𝑠 𝑔𝑖𝑣𝑒𝑛
𝑡ℎ𝑒 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑤ℎ𝑎𝑡 𝑖𝑠 𝑔𝑎𝑖𝑛𝑒𝑑
200
in Shtark = 600 => 0.333
125
in Tzargaryen = 250 => 0.5

a) Opportunity cost =
Opportunity cost
Opportunity cost

b) Absolute advantage of producing: Tzargayen have absolute advantage of producing arrows while
Shtark have absolute advantage of producing bows.
c) Shtark have comparative advantage in production of the bows since they have facilities which
facility faster production of huge quantity of bows than production of the arrows.
d) Trade which will better off include:
i.
Shtark trading 200 bows for 50 arrows from Tzargaryen is balanced trade since Shtark has
high probability of production of bows hence trade will help to balance deficit in trade.
ii.
Shtark trading 50 bows for 75 arrows from Tzargayen does not balance deficit in both
countries hence it will make on country better while other country worse off.
iii.
Shtark trading 125 bows for 50 arrows from Tzargaryen indicates that the tradeof...


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