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QUESTION 6. Source: Coyne, Andrew. "The real reason a Big Three bailout is a bad idea.\" Macleans, 1 December 2008: 16. Print. Time period: Great Recession, U.S. Economy. Part A. Create a list of economic vocabulary found in the excerpt below. \". . . however long a bill of indictment might be brought against Big Auto, that's not why we should refuse its demands for a bailout. This isn't about punishing Detroit for its past misdeeds. It isn't even about the auto industry, as such. It's about the economy as a whole, and how scarce resources are allocated between competing uses. Ultimately, it's about physics: the simple, inescapable reality that more of one thing means less of another . . . But the cost of (such) subsidies is not borne only or even primarily by the taxpayer, but by all those industries and firms that don't get bailed out. It's what economists call the opportunity costs: all the capital (financial) that subsidy traps in one industry is capital (financial) denied to other industries; all the sales diverted to one firm are sales diverted from its rivals; all the jobs 'created' in one part of the economy are jobs destroyed elsewhere.\" NOTE: subsidy = usually a financial payment given to support a business or firm Part B. What is the example used in this article to illustrate the basic economic problem? Part C. What is the basic economic problem? Part D. What model would you use to illustrate the basic economic problem? Draw the model, label the axes using the choices presented by this example. QUESTION 7. Part A. "About one billion marbles are made in the US. every year, mostly in central Illinois and West Virginia, where the needed silica sand, soda ash and natural gas used to heat the glass to make marbles are abundant. Marbles that used to cost a penny in the 19305 and 19405 now sell from 10 cents to 50 cents apiece unless they are rare and can cost a lot more. 'One reason for the rise in the price is the huge amount of energy needed to make marbles.' To make marbles, glass must be superheated in a vat, then cut into uniform pieces which are rolled into spheres by steel or cast-iron cylindrical screws rotating in opposite directions. Annealing or curing takes about 24 hours.\" A 1. "Silica sand, soda ash and natural gas" used in making marbles are examples of A 2. TRUE or FALSE. The rise in costs of energy needed to make marbles would be reected in the supply curve. Why would I tell you that the answer to this question is true? (And no, it's not simply to answer the question for you.) A 3. Categorize the following costs incurred by a marble producing firm as either FIXED or VARIABLE. WRITE OUT FIXED or VARIABLE on your answer sheet. (A) annual depreciation calculated for the operating machines such as the vats and cutting devices (B) the salary of the manager, who oversees the production process, and is employed yearround. (C) wages paid to workers who work the assembly lines to make the marbles (D) the amount and cost of silica sand and soda ash, the natural economic resources, needed to make the glass to make the marbles (E) the amount and cost of natural gas needed to heat the glass Part B. 1. When the price of bubblegum is $0.50, the Qd is 400 packs per day. When the price falls to $0.40, the Qd increases to 600. Given this information, you know that the elasticity of demand for bubble gum is (numerical gure) which means SHOW YOUR WORK using the midpoints formula. 2. When a bookstore sells cookie cook books at $15.00 each, they generally sell 70 per month during the months before Christmas. If they lower the price to $7.00 each, they sell 90. Given this, we know that the elasticity of demand for cookie cook books is (numerical gure) which means the bookstore should price to Total Revenue. SHOW YOUR WORK using the midpoints formula