2. The Basics of Neoclassical Economics a. Explain what is meant by the term "perfectly competitive" market? Describe all the conditions necessary for "perfect competition" to exist in a market. b. Explain the neoclassical viewpoint regarding the impact of competition on workers' wages. How might a neoclassical economist explain the existence of wage differences between equally productive Black and White workers. c. Describe the idea of opportunity cost and provide an example. d. Suppose you go to a convenience store to buy candy bars and packs of gum. Explain how the law of demand will impact the number of candy bars you will buy. Further, explain how an increase in the price of gum will impact the number of candy bars you will buy. e. Now suppose you are running a company that is producing candy bars and packs of gum. Explain how the law of supply will impact the number of candy bars you will produce. Further, assuming the same machinery can be used to produce either candy bars or gum, explain how an increase in the price of gum will impact the number of candy bars you will produce in the short run. f. Currently in the market for chewing gum, stores cannot keep chewing gum in stock. Does this situation represent one of excess supply or excess demand? What would we expect will happen to the price of chewing gum, the quantity of chewing gum demanded, and the quantity of chewing gum supplied as we move toward equilibrium? g. Now suppose the situation were reversed and stores have more chewing gum than they can put on the shelves. Does this situation represent one of excess supply or excess demand? What would we expect will happen to the price of chewing gum, the quantity of chewing gum demanded, and the quantity of chewing gum supplied as we move toward equilibrium? h. Explain what is meant by economic efficiency. If an automobile producer introduces a new technology that allows them to produce more cars with fewer workers so that the economy can produce the same number of cars with fewer resources, is this efficient? If the government increases taxes to fund the educational system and this results in the economy being able to produce more, is this efficient? i. Discuss the tradeoff between efficiency and equity. If we tax the rich and give the money to the poor, does this make the economy more equitable? Does this make the economy more efficient? j. Explain the concept of comparative advantage. Assume (1) the US and Mexico can both produce wheat, (2) Mexico can produce wheat more cheaply than the US, (3) Mexico can produce tomatoes but the US cannot, and (4) what and tomatoes use the same inputs. Using the concept of comparative advantage, how much wheat will Mexico produce? Why?