Chapter 9: Privatization (page 327)
What is economic liberalisation?
Short Answer
De regulation of the markets.
Chapter 9: Privatization (page 327)
What is economic liberalisation?
De regulation of the markets.
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Get started for freeFrom time to time, Congress has raised the minimum wage. Some people suggested that a government subsidy could help employers finance the higher wage. This exercise examines the economics of minimum wage and wage subsidies. Suppose the supply of low-skilled labor is given by
LS= 10w
where, LS is the quantity of low-skilled labor (in millions of persons employed each year), and w is the wage rate(in dollars per hour). The demand for labor is given by
LD= 80 - 10w
a. What will be the free-market wage rate and employment level? Suppose the government sets a minimum wage of \(5 per hour. How many people would then be employed?
b. Suppose that instead of a minimum wage, the government pays a subsidy of \)1 per hour for each employee. What will the total level of employment be now? What will the equilibrium wage rate be?
What does the term "nationalization" mean?
In Exercise 4 in Chapter 2 (page 84), we examined a vegetable fiber traded in a competitive world market and imported into the United States at a world price of \(9 per pound. U.S. domestic supply and demand for various price levels are shown in the following table.
Price | U.S. Supply (Million Pounds) | U.S. Demand (Million Pounds) |
3 | 2 | 34 |
6 | 4 | 28 |
9 | 6 | 22 |
12 | 8 | 16 |
15 | 10 | 10 |
18 | 12 | 4 |
Answer the following questions about the U.S. market:
a. Confirm that the demand curve is given by QD = 40 - 2P, and that the supply curve is given by QS = 2/3P.
b. Confirm that if there were no restrictions on trade, the United States would import 16 million pounds.
c. If the United States imposes a tariff of \)3 per pound, what will be the U.S. price and level of imports? How much revenue will the government earn from the tariff? How large is the deadweight loss?
d. If the United States has no tariff but imposes an import quota of 8 million pounds, what will be the U.S. domestic price? What is the cost of this quota for U.S. consumers of fiber? What is the gain for U.S. producers?
How does a change in technology affect the demand for labor?
A particular metal is traded in a highly competitive world market at a world price of \(9 per ounce.
Unlimited quantities are available for import into the United States at this price. The supply of this metal from domestic U.S. mines and mills can be represented by the equation QS = 2/3P, where QS is U.S. output in million ounces and P is the domestic price.
The demand for the metal in the United States is QD = 40 - 2P, where QD is the domestic demand in million ounces.
In recent years the U.S. industry has been protected by a tariff of \)9 per ounce. Under pressure from other foreign governments, the United States plans to reduce this tariff to zero. Threatened by this change, the U.S. industry is seeking a voluntary restraint agreement that would limit imports into the United States to 8 million ounces per year.
a. Under the $9 tariff, what was the U.S. domestic price of the metal?
b. If the United States eliminates the tariff and the voluntary restraint agreement is approved, what will be the U.S. domestic price of the metal?
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