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... London that drivers must pay to enter? In general, how would you answer a question like this one? I would have to say yes because it is located in the city. I would answer a question like this one by finding out more information about where the park is located and determining from there if it is in the zone. 5. Usually, when the elasticity of a demand curve is greater than 1, an increase in price leads to a fall in revenue. Why is it that in the calculation done here, this result does not seem to hold? (Hint: Distinguish carefully between the total cost of a trip in London and the fee that someone pays to the city. A 20% increase in the fee will not lead to a 20% increase in the total cost.) It will not lead to a 20% decrease of people entering the city because there are more cost associated with entering the city then just the entrance fee. You must associate gas and also time saved by driving in. That is why you do not see a 20% decrease into the city. 6. The costs of completing a transaction can be as important as the price actually paid. For example, consider a toll road that requires drivers to frequently wait in line at a tollbooth. The transaction costs for collecting the tolls -- wasted gas, increased pollution, and lost time-- can greatly decrease the net benefits from reduced congestion. According to the article, the costs of collecting traffic fees in London are relatively low. What existing infrastructure allowed London to enforce fees for traveling in London without using tollbooths? How do you think the existence of this infrastructure affected the political and economic feasibility of London's toll system? They used high-speed electronic tolls, sharpshooter cameras and satellite for tracking cars. Well this infrastructure would greatly increase political and economic feasibility because it allows people to decrease their travel time which also increases the flow of traffic through the tolls and allows more cars to get through at a quicker pace. Would a Government Ever Want to Limit Exports? Discussion Questions: 1. Steel scrap is used as an input by firms that manufacture steel. Consider the following quote from a website maintained by the Emergency Steel Scrap Coalition, a lobbying organization formed in the fall of 2003 by a group of firms in the United States: U.S. scrap processing and consuming industries are facing a steel scrap export crisis. Scrap exports from the United States have doubled since 2000, rising from 6.3 million tons in 2000 to approximately 12 million tons in 2003 . . . This sharp increase in steel scrap exports has caused U.S. steel scrap prices to surge to unprecedented levels, and has led to serious and growing concerns about scrap unavailability . . . These sharp price increases and the potential for scrap shortages are having significant, harmful effects on important manufacturing sectors of the U.S. economy. What policy would you expect this group to recommend for dealing with the "steel scrap export crisis"? What types of firms would you expect to be members of this coalition? The policy that this group would recommend would be a tariff placed on company’s importing steel from abroad. Manufacturers of steel and other firms that extract raw materials to make steel. Places that would oppose the tariff would be car manufacturers, building supply companies, and many others who use steel. 2. Some firms in the United States now outsource computer-programming tasks. They hire programmers in countries such as India to do work formerly done by programmers living in the United States. Supporters of outsourcing argue (correctly) that as long as the government follows a macroeconomic policy that keeps the economy at full employment, outsourcing will not lead to higher unemployment among computer programmers living in the United States. Why might programmers living in the United States still be opposed to outsourcing? Think about the supply and demand for programmers in the United States. How might outsourcing affect wages? Programmers in the United States still will be opposed to outsourcing because many of them will lose their jobs, but it also creates other higher paying jobs. People might have to increase their education for these jobs and might not want to and that is why they oppose outsourcing. Also people will be opposed in that sector because the few jobs that remain for that particular job will now have a great supply of programmers needing the job so wages will fall. Should Monopolists Cut Their Prices When Demand Falls? Discussion Questions: 1. Suppose that only high-income consumers are willing to pay between $20 and $25 for a music CD. Also suppose that only high-income consumers have access to the Internet and music downloads. Finally, imagine that all these consumers stop buying CDs when illegal file sharing becomes popular. Under these assumptions, do you expect file sharing to cause the new demand curve to rotate inward in relation to the old demand curve? Or do you expect the new demand curve to shift inward and parallel to the old demand curve? I would expect the new demand curve to shift inward and parallel to the old demand curve because there would be an income effect and a substitution effect. 2. Suppose that all consumers cut their CD purchases by a certain percentage when illegal file sharing becomes popular. Under these assumptions, would you expect file sharing to cause an inward rotation of the demand curve or a parallel shift inward? Under these assumptions I would expect file sharing to cause an inward rotation of the demand curve. 3. Suppose you are a music executive and you want to make the right (that is, profit-maximizing) decision about maintaining or cutting the prices of your CDs. You observe that at your current prices, CD sales have fallen dramatically. What would you want to know about the shift in the demand curve for CDs? How might you learn more about the shift in your demand curve? I would want to know whether it was a income effect or a substitution effect. Also I would want to know any factors that played a role in the change in demand curves. I would learn about the shifts in the demand curve my receiving the information from sales and income changes from the government offices and create demand and supply curves. Branding Beef Discussion Questions 1. Would you pay more for "brand name" hamburger than for the store brand? Why? Yes, because brand name hamburger is tested better for bacteria and has stronger restrictions on what meat is accepted. Also it has been raised in an environmentally sensitive way which yields a higher quality. 2. Name other examples of agricultural products that have attempted to differentiate themselves. How have they differentiated their product? (Hint: Precut chicken is one example mentioned in the article.) Tyson chicken vesus other chicken companies they claim they do not add water and only use top grade chickens. Also lobster companies claiming that Maine lobster is the best quality. 3. If brand name beef becomes very successful and the industry becomes similar to the precut chicken industry, what would be the best way to describe its market structure? Why? As a monopolistic arrangement they are seeking to create dominance for their group and raise prices of their goods. Firms are banding together to create one supper company to control prices and output. 4. Under the Beef Checkoff Program, payments by beef producers are mandatory. Why might this be necessary for the success of the program? (Hint: If the program were voluntary, would you agree to the payment? Why or why not?) This is vital to the success of the program because they have to get what is equivalent to a license. This cost is a fee that can be kept if they are not in accordance to the program and will get kicked out. Therefore they will want to follow the rules of the program so that they can keep the status of “brand name” hamburger. If the program were voluntary then people would think since they paid more money they should be able to sell however much they want which would drive down costs. This is why they pay a fee and there are rules associated with the program. Rent Control: Preventing Capitalistic Acts between Consenting Adults Discussion Questions: 1. What does it mean to...