Another Mankiw problem for the motivated Micro student! | Welker's Wikinomics Blog - 2 views
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Harvard’s Greg Mankiw just keep them coming! Here’s another micro problem from the esteemed professor and textbook author’s blog. Several readers enjoyed challenging themselves with his last Micro problem, so I will re-publish Mankiw’s test question here to see if people can solve it in the comment section on this blog (sorry Professor Mankiw, you have comments turned off on your blog, so how are your readers to know if they have solved it correctly?)
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The town of Wiknam has 5 residents whose only activity is producing and consuming fish. They produce fish in two ways. Each person who works on a fish farm raises 2 fish per day. Each person who goes fishing in the town lake catches X fish per day. X depends on N, the number of residents fishing in the lake. In particular, X = 6 – N. Each resident is attracted to the job that pays more fish. a. Why do you suppose that X, the productivity of each fisherman, falls as N, the number of fishermen, rises? What economic term would you use to describe the fish in the town lake? Would the same description apply to the fish from the farms? Explain. b. The town’s Freedom Party thinks every individual should have the right to choose between fishing in the lake and farming without government interference. Under its policy, how many of the residents would fish in the lake and how many would work on fish farms? How many fish are produced? c. The town’s Efficiency Party thinks Wiknam should produce as many fish as it can. To achieve this goal, how many of the residents should fish in the lake and how many should work on the farms? (Hint: Create a table that shows the number of fish produced—on farms, from the lake, and in total—for each N from 0 to 5.) d. The Efficiency Party proposes achieving its goal by taxing each person fishing in the lake by an amount equal to T fish per day and distributing the proceeds equally among all Wiknam residents. Calculate the value of T that would yield the outcome you derived in part (c).
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e. Compared with the Freedom Party’s hands-off policy, who benefits and who loses from the imposition of the Efficiency Party’s fishing tax?
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Okay, this time I want to get in on the action before all you smart people get this one right on your first try again! I will offer my answers, but withhold the explanations for further discussion once other people have had a chance to chime in. a) Productivity of additional fishermen falls on the lake due to the law of diminishing marginal returns. Fish farmers would not experience diminishing returns, since each farmer is given access to additional land (or in this case water) and capital, assuming each farmer has his own farm. On the lake, labor is the only variable resource. On farms, land and capital vary with labor, assuring marginal product remains constant as additional residents get into fish farming b) Without any government interference, 1 resident will farm fish, and four will fish on the lake. c) To maximize town's total output of fish, only two residents should fish on the lake, and three should farm fish. d) To yield the maximum output of fish for the town, the town should tax lake fisherman by 2 fish. T=2. e) The hands off policy would have yielded 2 fish per resident per day. The fishing tax will ultimately yield each resident 2.8 fish per day. Therefore everyone benefits. The two lake fisherman give up half their daily catch to the government, but get part of it back through the re-distributive plan. Who else has their own answers, or explanations of MY answers!!??
Free Technology for Teachers: Life on Minimum Wage - Economics Lesson - 17 views
A Micro problem for the advanced Econ student | Welker's Wikinomics Blog - 5 views
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I love that Harvard Economics professor Gregory Mankiw blogs, but I hate that has de-activated the comments on his blog. Yesterday he posted a question from his own Harvard introductory economics class. Since he doesn't allow comments though, I cannot tell if I'm solving it correctly. So I will re-publish it here and ask my readers to solve the problem in the comment section. IB and AP students who have studied microeconomic should be able to put some of their basic algebra skills to work to solve this one.
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Molly, could you explain how you determined that at a world price of $6, the firm's profit maximizing Q would become 5 units? Why did we equalize P=MC to find the firm's output at a price of 6? I see why the firm becomes an exporter at a world price of $6 if they produce 5 units (since domestic Qs exceeds domestic Qd) but just not why we determine the firm's output by P=MC. Thanks!
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I guess I am assuming that once there is free trade the monopolist has to act like a perfect competitor and at least in the world market is a price taker. It's a bit like the monopsonist who has to become a wage taker once there is an effective minimum wage. Consequently he employs more workers since his MFC equals the wage.
Big Mac Index updated daily... - 4 views
LRB · John Gray · We simply do not know! - 0 views
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The last two years, in which capitalism has suffered one of its periodic shocks, have given John Maynard Keynes a new lease of life. Events have demonstrated the limits of the theory that economies can be relied on to be stable if they are lightly regulated and otherwise left to themselves. There is now much talk of the paradox of thrift, whereby the rational choices of individuals can prove collectively ruinous, and of the need for government to counteract the inherently anarchic tendencies of markets. Keynes has been revived because he understood that markets are very often irrational. Unfortunately, few of those who urge that we go back to him seem to have understood why he believed this.
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Apart from a brief postscript to one of the chapters and a few remarks in the preface, George Akerlof and Robert Shiller’s Animal Spirits was written before the current crisis. Yet, based on research undertaken over many years, it can be read as prefiguring the current disillusionment with economics. The trouble with prevailing theories, in Akerlof and Shiller’s view, is that they assume human beings are more rational than they actually are. ‘This book, which draws on an emerging field called behavioural economics, describes how the economy really works,’ they claim. ‘It accounts for how it works when people really are human, that is, possessed of all-too-human animal spirits.’
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‘Just as Adam Smith’s invisible hand is the keynote of classical economics,’ they write, ‘Keynes’s animal spirits are the keynote to a different view of the economy – a view that explains the underlying instabilities of capitalism.’ Here they are endorsing the caricature of Smith propagated by neoliberal ideologues anxious to confer a distinguished patrimony on an illegitimate intellectual offspring.
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AP Macro and IB teachers should read this review of George Akerlof and Robert Schiller's book "Animal Spirits". There are some great points in this piece that can be brought into the AP or IB classroom with regards to the assumption of rational behavior and more importantly the Keynesian/Classical debate on Macroeconomic policy issues.
Win As Much As You Can - 4 views
Unemployment and Demographics - 1 views
Life on Severance: Comfort, Then Crisis - WSJ.com - 1 views
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The family recently vacationed in Virginia Beach, Va., and likes to dine on Porterhouse steaks. Since losing his job, Mr. Joegriner, 44 years old, has had several offers. He's turned each down in hopes of landing a position comparable to what he held before.
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Mr. Joegriner is a member of what might be called the severance economy -- unemployed Americans who use severance pay and savings to maintain their lifestyles. Many lost their jobs in 2007 and 2008, and thought they'd soon find work. Now, they're getting desperate.
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Last week, lawmakers passed a bill extending unemployment benefits up to 20 weeks. Unemployment benefits, which typically last about 26 weeks, were expected to run out for 1.3 million people by the end of the year, according to the National Employment Law Project.
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Source for interactive charts - 6 views
Modest website available... - 4 views
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I would like to make any resources available to any AP Econ teacher who may need help...I maintain a modest website www.haywardecon.com with many ppts and other resources. I have created many things but also have liberally "borrowed" from GREAT econ teachers world-wide (I give credit on my Macro/Micro pages)...Use if it will help...:)
Podcast: In The Classroom - Planet Money Blog : NPR - 2 views
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I love NPR's Planet Money. I try to listen to every episode, usually on my way to school in the morning. I is not at all unusual for me to use the very podcast I listened to on the way in during that day's class! All econ teachers should be listening to Planet Money (no, like economics, it is NOT only about money!)
Quick Notes Economics - 10 views
YouTube - ACDCLeadership's Channel - 8 views
Knowledge Learning Corporation | Child Care & Education Services - 3 views
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I've always thought about how great it would be to teach Economics from my ski cabin in the mountains of Northern Idaho... perhaps teaching AP Econ online would be the way to go! Here's the deal: "Are you looking for a great opportunity, a rewarding career, or the chance to make a difference? KC Distance Learning is hiring NCLB Highly Qualified High School certificated teachers to fill positions across the country. We currently have part-time and full-time positions available for qualified teachers who want to work from their home. Working at KCDL you will enjoy a flexible work environment, utilize the latest distance learning and communications technology, and, best of all, you can help students from all walks of life achieve their individual potential."
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