Liberty University Econ 213 Problem Set 2 Complete Solutions Correct Answers Key

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ECON 213Page1of8LIBERTYUNIVERSITYECON213PROBLEMSET2COMPLETESOLUTIONS CORRECT ANSWERS KEYProblem Set 2 isdueby 11:59 p.m. (ET) on Monday of Module/Week 4.1.The following table presents data for wages in the market forInternet security professionals.(Hint:In the labor market,the roles are reversed. Those who want to hire labor are thedemanders.The workers enter the workforce providing labor to the marketplace,so they are thesuppliers.)WageQuantity DemandedQuantity Supplied$50,00020,00014,000$60,00018,00018,000$70,00016,00022,000$80,00014,00026,000$90,00012,00030,000a.)What is the equilibrium wage? ___________________________________Now, consider this scenario: Due to an increase inInternet security threats, the governmentwants to apply a price control in this market to encourage more people to becomeInternetsecurity professionals. Assume that a wage control is set at $75,000.b.)Will this increase the number of people entering this labor market? Why or why not?c.)Will this increase the number of people hired? Why or why not?2.Assume you are a policymaker in Washington,DC.Lobbyists for thePreschoolersofAmerica have put pressure on their representatives to cap prices on graham crackers.Youhave been assigned a position on a new committee to study the impact of a price ceiling ongraham crackers.Your job is to:a.)Illustrate using a fully labeled supply and demand graph what such an artificial price lookslike(label all the axes and any lines you put in your graph).b.)Explain what the results of such a move are for the graham cracker market.In other words,will there be ashortage, asurplus, or neither created?Why?3.Pollution is considered by most a negative externality.Some economists would like to seethe costs of these burdens incorporated into the price of goods that we buy.For instance,since coal-firedpower plants increase emissions that could potentially lead to climatechange, these economists believe that the price we pay for electricity is not high enough.a.)Draw a completely labeled graph and illustrate on the graph how much higher electricityprices would be if the full costs of electricity production were taken into account.You do notneed to provide actual numbers; rather, show on the price axis where the price would bebefore the externality is considered andwherethe pricewould beafter the externality isconsidered.b.)What problems might exist indetermining this new, externality-based price?4.Using the informationbelowaboutindividuals and their willingness to pay for abottle ofginger ale, calculate the total consumer surplus at a market price of $5.Maximum amount a buyer

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ECON 213Page2of8would pay for ginger aleScott$10Dennis$4Greg$8Dave$7Mike$5Using the information below about willingness to supply ginger ale, calculate the total producersurplus at a market price of $5.Marginal cost ofproducing ginger aleGene$6Brandon$3Matt$2Cooper$11Jed$5How do your answers change if the price falls to $2?

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