True, False & Explain (2 points for correct true/false, 8 points for your explanation) 5. Over Thanksgiving there will be dishes to wash. Assume (a) that you're spending the day with your family, (b) that your dishwasher, if you have one, breaks down on Thursday (c) that you and one of your family members (sibling, cousin, whatever) are tasked with washing and drying the dishes (d) that the dishwasher cleaned everything but the plates before breaking down and (e) that the quality of work is identical for you and your relative. It takes you 8 minutes to wash a plate and 12 minutes to dry a plate while it takes your relative 15 minutes to dry a plate and 10 minutes to wash one. T/F & Explain: You have an absolute advantage in drying plates but a comparative advantage in washing plates and there are gains to be had from specialization and trade. 6. A federal subsidy on student loans is beneficial to students, professors, and society. 7. A minimum wage above the market clearing wage helps poor or socially marginal workers. Short Answer 8. (20) In the board game "Tzolk'in: The Mayan Calendar" you lead a tribe of Mayans, trying to ensure that they become the dominant and most favored group within the Mayan empire. You start with three workers on a turn you have to either place on, or remove workers from, a series of cogs that rotate at the end of each turn. There is no expense to removing workers from the cogs and you may remove more than one of them at a time should you wish. However, when you place workers on the cogs, you need to send corn with them to ensure that they don't starve during their time away. The amount that you must send with them varies depending upon how many you place on a turn. If you place a single worker on your turn they can be expected to simply grab what's available and make do. However, placing more than one worker requires additional supplies. Below is a player aid from a game that shows the total corn you must have and must dispense depending upon how many workers you send out at a time (0 for one worker placed, 1 when placing two workers, etc.). This aid in its unedited form includes a column for the marginal expense of placing the second worker, the third worker and so on. a. Calculate the marginal expense values that are blank on the player aid above. b. If, on your turn, you estimate that the benefit of placing each worker is 3.72 corn, how many workers would you place? c. Explain why I carefully use the word "expense" rather than "cost in" my explanation of the game. 9. (50) The Food and Drug Administration has, for some time, been evaluating whether or not to apply the rules that govern drug manufacture to the manufacture of the liquids used in electronic cigarettes. At the same time, there is legislation that may impose taxes upon the sale of such liquids. The argument put forward for these policies is that they will improve public health. Your task is first, to diagram this market, being as specific as possible (i.e. including numbers if possible). Second you should assess the impact of a tax on e-liquids upon well being in Billings (again, providing a dollar value of increase or decrease in well being and social cooperation if possible) and upon the incidence of the smoking of regular cigarettes. Next, include an assessment of the likely impact of this policy (in the long run) upon lung cancer rates in Billings. Fourth, calculate the current price elasticity of demand before and after the tax is imposed. Finally, provide your assessment as to whether, from the perspective of society in Billings, the FDA should regulate and/or tax the sale of e-liquids. Some information that may or may not be useful: a. The current number of bottles of liquid sold in Billings each year is 250,000. b. E-cigarettes contain no carcinogens (cancer causing compounds). Regular cigarettes are full of these compounds. c. It costs (in economic terms) e-liquid manufacturers the same amount to make a bottle of liquid regardless of how many bottles they make. This amount is $20. d. E-cigarettes draw power from a rechargeable battery to power a coil that vaporizes the liquid. The temperature of the resulting vapor is about the same temperature as the smoke from regular cigarettes. e. The revenue that a $5 per bottle tax on e-liquids would raise in Billings is $500,000.