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20. Consider the U.S. product market for bananas and the banana industry labor market in a developing country (DC) which grows all bananas consumed in
20. Consider the U.S. product market for bananas and the banana industry labor market in a developing country (DC) which grows all bananas consumed in the U.S. Assume both markets are perfectly competitive. (Every part requires at least one graphical model.)
- Set up graphical models of the U.S. banana product market and DC banana labor market in initial equilibrium.
- Suppose that U.S. human rights advocates run a media campaign showing that young children are picking a lot of the bananas sold in the U.S. All growers are said to hire children. Holding all else constant, what effects would you expect this campaign to have on the two markets?
- Suppose instead that the developing country passes legislation which prohibits the use of child labor. Holding all else constant, how will this new law affect equilibrium wages and employment? How will the legislation affect the equilibrium price and quantity of bananas?
- Suppose instead that the human rights workers' media campaigndistinguishes bananas from growers that hire child labor (CLG) from bananas from growers that do not hire child labor (NCLG). Assume that NCLG bananas are labeled (at essentially no cost). Holding all else constant, how would this affect the banana product market and labor market? (Think carefully about this problem.)
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