Exam 7: Externalities and Public Goods, Employment and Unemployment

The following table defines some population statistics for two countrries. If a group of students decided to try to find jobs while they are studying, which of the above rates would change at first? Assume that it takes the students a few months to actually find a job.

The following excerpt is from Timothy R. Hylan, Maureen J. Lage, and Michael Treglia, ʺThe Coase Theorem, Free Agency, and Major League Baseball: A Panel Study of Pitcher Mobility from 1961 to 1992ʺ ( Southern Economic Journal 62, no. 4 (1996): 1029-42). Many economists and legal scholars interpret the [Coase] theorem as containing two propositions. The first is that, in the absence of transactions costs and wealth effects, parties will bargain to an efficient outcome. The second holds that the same outcome will be achieved regardless of the distribution of property rights. … Major League Baseball [MLB] presents a natural experiment consisting of an industry in which there has been an explicit change in the assignment of property rights. Beginning in 1879, … a player could negotiate salary only with the team that owned his contract and the team could trade or sell the player as management saw fit. In 1976 this system was replaced by the institution of free agency whereby a player with at least six years of Major League experience acquired the right to sell his services to prospective buyers…. The empirical analysis shows that after the introduction of free agency, the pitchers with greater longevity in the major leagues are less likely to move relative to their mobility in the pre-free agency period. The results also indicate that, in general, better pitchers are less likely to move and that pitchers playing on teams with higher winning percentages or in large market cities were less likely to move. -Refer to the scenario above. Which of the following could be a cause for different patterns of player mobility in MLB before and after 1976?

In Brazil, more than 60 percent of sugar cane grown is harvested by hand. In São Paulo state, nearly 300,000 workers are employed in sugar cane harvesting. Manual harvesting requires burning the cane fields prior to harvest to remove the caneʹs sharp leaves and drive snakes from the fields. Burning the cane fields, however, gives off large quantities of ammonia and nitrogen oxide, which lead to ozone creation. In São Paulo state, a layer of ash covers cars, and nitrogen oxide levels double during the harvest period. The nitrogen oxide produced from burning the cane fields can lead to acid rain and changes in water quality. -Refer to the scenario above. In the graph below, the socially optimal level of production occurs at which point?

The figure below shows labor supply and labor demand curves. -Refer to the figure above. John's reservation wage is w₁ and Joy's reservation wage is w₂. Assume that a minimum wage is implemented at w₁. John and Joy are both unemployed. What is true about John and Joy?

Susan, Kevin, and Joshua are three individuals who were previously employed but do not have jobs now. Classify these three individuals according to their type of unemployment: a) Susan lost her job a year ago. Although she would like to have a job, she has given up looking for one as she thinks there are no suitable jobs available for her. b) Kevin was working as a finance teacher, but quit his job a few months back to become a stockbroker. Ever since he quit his job, he has been unable to get a new one, although he is actively looking for one. c) Joshua was employed in a steel mill. He lost his job when the labor union in his mill demanded a hike in wages.

Truck drivers across the country are on strike in an effort to negotiate higher wages. Currently the labor market in this industry clears at W_M and Q_M, as shown in the figure below. - Refer to the scenario above. Assume that the negotiations were successful and a minimum wage has been implemented. Shortly thereafter, new technology that allows trucks to drive without drivers becomes available. How is the equilibrium in the driver market likely going to change?

Which of the following statements is true?

In 1973, economist Steven N. S. Cheung wrote an article demonstrating that private bargaining between beekeepers and agricultural producers achieved the efficient outcome in the market for pollination services in Washington state ("The Fable of the Bees: An Economic Investigation." Journal of Law and Economics 16, no. 1 (1973): 11-33). Strong colonies of honeybees are necessary for pollinating some crops, and they also increase yields. Colonies that are co-located with good pollen sources produce more honey. Suppose the following facts describe the market for pollination services for seed alfalfa in Washington state: seed alfalfa growers harvest an additional $4,000 worth of alfalfa seed when honeybees are co-located with their crop; beekeepers realize an additional $1,500 worth of honey when their bee colonies are co-located with alfalfa; and the cost of moving to another alfalfa grower's field is $500. What amount of payment from the alfalfa grower to the beekeeper will result in a market for pollination services that achieves the efficient outcome? Explain your answer.

What constitutes evidence for the efficacy of the congestion charge described in the text?

The following table defines some population and employment statistics for two countries. -Refer to the table above. Due to technological changes, older workers have difficulty finding jobs in Spicy Country. The unemployment rate for people older than 60 is much greater than the unemployment rate for the general population. If a new policy allowed workers in Spicy Country to retire at age 60, what is likely to happen?

The following figure illustrates the labor demand curve, LD₁, and labor supply curve, LS₁, in the market for engineers. a) What are the equilibrium wage rate and employment level in the market? b) If the government thinks that engineers are underpaid in the country and fixes a minimum wage of $50 per hour, what will be the impact on the level of employment? c) If engineers unionize themselves and negotiate a wage that is $30 higher than the market-clearing wage, what will be the impact on the employment level?

In episode 12 of the sixth season of The Sopranos, A. J. is watching television with his girlfriend Bianca at her apartment when a group of neighborhood youths begins playing music at a very loud level outside. A. J. approaches the youths and offers them his new mountain bike if they will stop playing the music and leave. The group of youths accepts the mountain bike and leaves. This scene is an example of ________.