MICROECONOMICS PRINCIPLES:

Ques1) In the labor-discipline model (LDM), the employer sets the wage to minimize the cost of effort. Using the LDM, illustrate and explain how a change in conditions affect the employee's best response function (BRF) in the following scenarios: Make proper diagrams with explanations-

a)Being monitored by the boss using tracking technology to detect 'shirking' whilst working from home in urban Australia.

b)In relation to the hospitality sector (e.g. restaurant industry) in the US: a sharp increase in the pool of unemployed people due to a hiring freeze, combined with a rise in unemployment benefits.

To support your answer in (a), refer to the following news article by Edwina Stott and Nick Wiggins (2020), "Being monitored by your boss while working from home necessary trade-off or 'stupid' surveillance?", ABC News, October 16, available: https://www.abc.net.au/news/2020-10-16/work-from-home-tracking-software-monitoring/12766020

To support your answer in (b), refer to the following news article by Neil Irwin (2021), "'Unemployment Is High. Why Are Businesses Struggling to Hire?", The New York Times, May 11, available: https://www.nytimes.com/2021/04/16/upshot/unemployment-pandemic-worker-shortages.html.

Ques2) Refer to the following news articles on 'Dogecoin':

1.David Chau (2021), "Dogecoin 'bubble' surges ahead of Elon Musk's debut on Saturday Night Live", ABC News, May 07, available: https://www.abc.net.au/news/2021-05-07/dogecoin-elon-musk-tesla-snl-to-the-moon-doge/100113706

2.James Purtill (2021), "Some Australians have made a fortune on Dogecoin, but they say it's not all about the money", ABC News, May 21, available: https://www.abc.net.au/news/science/2021-05-21/dogecoin-cryptocurrency-stories-of-australians-who-made-money/100144664

Based on this discussion in the articles and relevant microeconomic theory, explain the endogenous processes at work of the Dogecoin bubble. Use relevant demand and supply diagrams to aid your answer and show how there is an unstable equilibrium.

Ques3) a)Use the cap-and-trade model to explain in technical detail the two outcomes of abatement using CO₂ permits: the 50:50 split and the cap-and-trade equilibrium. In your answer, show the gains from trade between the two firms.

b)Describe the way a cap-and-trade policy works to someone who has not studied economics. How would you respond to their concerns that the policy is likely to be ineffective and unfair to producers?