Liberty University Econ 213 Problem Set 2 Complete Solutions Correct Answers Key
Solutions for problem set 2 covering key microeconomic and macroeconomic concepts.
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ECON 213
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LIBERTY UNIVERSITY ECON 213 PROBLEM SET 2 COMPLETE
SOLUTIONS CORRECT ANSWERS KEY
Problem Set 2 is due by 11:59 p.m. (ET) on Monday of Module/Week 4.
1. The following table presents data for wages in the market for Internet security professionals.
(Hint: In the labor market, the roles are reversed. Those who want to hire labor are the
demanders. The workers enter the workforce providing labor to the marketplace, so they are the
suppliers.)
Wage Quantity Demanded Quantity Supplied
$50,000 20,000 14,000
$60,000 18,000 18,000
$70,000 16,000 22,000
$80,000 14,000 26,000
$90,000 12,000 30,000
a.) What is the equilibrium wage? ___________________________________
Now, consider this scenario: Due to an increase in Internet security threats, the government
wants to apply a price control in this market to encourage more people to become Internet
security 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 the Preschoolers of
America have put pressure on their representatives to cap prices on graham crackers. You
have been assigned a position on a new committee to study the impact of a price ceiling on
graham crackers.
Your job is to:
a.) Illustrate using a fully labeled supply and demand graph what such an artificial price looks
like (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 a shortage, a surplus, or neither created? Why?
3. Pollution is considered by most a negative externality. Some economists would like to see
the costs of these burdens incorporated into the price of goods that we buy. For instance,
since coal-fired power plants increase emissions that could potentially lead to climate
change, 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 electricity
prices would be if the full costs of electricity production were taken into account. You do not
need to provide actual numbers; rather, show on the price axis where the price would be
before the externality is considered and where the price would be after the externality is
considered.
b.) What problems might exist in determining this new, externality-based price?
4. Using the information below about individuals and their willingness to pay for a bottle of
ginger ale, calculate the total consumer surplus at a market price of $5.
Maximum amount a buyer
Page 1 of 8
LIBERTY UNIVERSITY ECON 213 PROBLEM SET 2 COMPLETE
SOLUTIONS CORRECT ANSWERS KEY
Problem Set 2 is due by 11:59 p.m. (ET) on Monday of Module/Week 4.
1. The following table presents data for wages in the market for Internet security professionals.
(Hint: In the labor market, the roles are reversed. Those who want to hire labor are the
demanders. The workers enter the workforce providing labor to the marketplace, so they are the
suppliers.)
Wage Quantity Demanded Quantity Supplied
$50,000 20,000 14,000
$60,000 18,000 18,000
$70,000 16,000 22,000
$80,000 14,000 26,000
$90,000 12,000 30,000
a.) What is the equilibrium wage? ___________________________________
Now, consider this scenario: Due to an increase in Internet security threats, the government
wants to apply a price control in this market to encourage more people to become Internet
security 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 the Preschoolers of
America have put pressure on their representatives to cap prices on graham crackers. You
have been assigned a position on a new committee to study the impact of a price ceiling on
graham crackers.
Your job is to:
a.) Illustrate using a fully labeled supply and demand graph what such an artificial price looks
like (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 a shortage, a surplus, or neither created? Why?
3. Pollution is considered by most a negative externality. Some economists would like to see
the costs of these burdens incorporated into the price of goods that we buy. For instance,
since coal-fired power plants increase emissions that could potentially lead to climate
change, 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 electricity
prices would be if the full costs of electricity production were taken into account. You do not
need to provide actual numbers; rather, show on the price axis where the price would be
before the externality is considered and where the price would be after the externality is
considered.
b.) What problems might exist in determining this new, externality-based price?
4. Using the information below about individuals and their willingness to pay for a bottle of
ginger ale, calculate the total consumer surplus at a market price of $5.
Maximum amount a buyer
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Document Details
University
Liberty University
Subject
Economics