Someone please help with these! PLEASE INCLUDE GRAPHICAL ANALYSIS! Thank you!
II. (13 points) Written Answer, graphical analysis required. The coronavirus pandemic has raised questions about how policy makers should respond to future viral pandemics in order to promote an efficient use of society's resources in the face of competing wants (c.g., promoting public health while also producing other goods and services that consumers want and that keep workers employed and earning income). Please answer the questions below with the understanding that physical contact between people increases the likelihood of a Covid-type virus spreading and endangering public health. (For further information, please read the Wall Street Journal article reprinted on the last page of this exam titled "Governments Zero In On an Essential Ratio" (April 21, 2020)). 1. Draw a supply and demand graph for the labor market (see Chapter 1 1, p. 247 of the McEachern text for an example) where the supply of labor (S) represents the quantity supplied of workers (all types of workers not just carpenters) at various wage rates (W) and the demand for labor (D) represents the demand for labor (all types of workers not just carpenters) at various wage rates. Label the market equilibrium wage rate (W) and the equilibrium quantity of labor employed (L). 2. Explain in words and show in your graph the "spillover cost" that occurs if people supply labor (S) but increase the spread of a Covid-type virus by going to work. That is, draw in your graph a curve that shows the additional social costs of people going to work and label MSC (representing the Marginal Social Costs of people going to work). 3. Explain in words why the "free market" equilibrium level of employment (L) you have shown in question 1 is not a socially efficient level of employment. Label the socially efficient level of employment L* in your graph and explain why the free market level of employment is not socially efficient given the presence of a pandemic Covid-type virus. 4. What policy (or policies) might guide the labor market to a socially efficient level of employment (L*)? We have learned that a socially efficient use of resources involves undertaking an activity to the point where the marginal social cost (MSC) equals the marginal social benefit (MSB) of the activity. Based on the concept of social economic efficiency, explain how you would respond to the following two statements: 1) "People and businesses should be allowed to work/operate or not work/operate as they please" and 2) "People and businesses should be banned from working/operating until a vaccine for the Covid-type virus is fully administered to prevent the spread of the disease." 6 Governments Zero In "/21/20 On an Essential Ratio BY STEPHEN FIDLER In the center of the U.S. health crisis, New York Gov. Governments across Europe Andrew Cuomo said on Sun- and in the U.S. say they have day that the infection ratio in driven down a key variable to the state had been slowed to levels that suggest that the 0.9, but added, "We have a lockdowns that plunged their very small margin of error economies into the deep here as we navigate going for- freeze are succeeding in con- ward." If the reproduction ra- taining the spread of the tio were to rise slightly to 1.2, deadly new coronavirus. he said, "the virus is increase The variable measures the ing and is an epidemic and an average number of other peo- outbreak and is out of con- ple each carrier of the new trol." coronavirus infects. This infect In Europe, governments tion ratio will be avidly have also said they have watched as policy makers cali- brought the ratio below one, brate the task of rolling back while emphasizing that the measures that have kept hun- battle against the virus is far dreds of millions of people at from won and that the ratio home. could surge again. French If the reproduction ratio is Prime Minister Edouard Phi below one, the epidemic pe- lippe said on Sunday that the ters out. The closer to one, the variable in France had fallen slower the decline, and the to 0.6, showing that the greater risk of a resurgence. If spread "is slowing and slow- the ratio sticks above one, the ing rapidly" thanks to the con- epidemic will gather momen- finement measures that have tum. The good news is across been in place since March 17. Europe and in parts of the U.S. The latest ratios represent the ratio has fallen below one. a significant decline from the The trouble is that the average of three to four that spread of the virus is highly many studies estimate would sensitive to whether the ratio have been the reproduction ra- is just below or just above tio if nothing had been done. one. That sensitivity means With an unmitigated rate of governments will have to esti- spread, the serious symptoms mate how proposed relaxation of Covid-19, the disease caused measures such as opening by the new coronavirus, suf- schools, restarting factories fered by a minority of patients and reopening stores will af- would have overwhelmed fect the ratio, and they will health systems in most coun- have to continue to monitor tries. the impact in real time. If the Scientists are still working number rises back above one, on models that may help in some restrictions may have to calibrating measures to relax be reimposed. the lockdowns
