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15 Mar 2019

A large proportion of the Canadian population will retire over the next 20 years

Under what circumstances will this event lead to smaller output per person in Canada?

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Nestor Rutherford
Nestor RutherfordLv2
18 Mar 2019

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Related questions

Use the following information to answer the next 2 questions: GDP per capita can be shown to equal average labor productivity times the proportion of the population that is employed (GDP/population= Y/L * L/population).

(a) The two factors that determine a nation's standard of living are: 1) the proportion of the population that works, and 2) its output per worker. The United States has an aging population and the proportion of the population that works is expected to decrease. Mexico has a relatively young population and, thus, the proportion of its population that works is expected to increase in the future. Given these circumstances, which of these two factors do you think is more relevant in each country for their standard of living? Explain your answer.

(b) Explain what happens with Econoland's total output (GDP) and its standard of living (as measured by GDP per capita) between 2014 and 2015, if we know the following information. The population of Econoland remains constant at 1,000 persons during both years. The number of employed workers increases from 400 in 2014 to 440 in 2015, but labor productivity, as measured by output per employed worker, decreases from $2,000 to $1,900 during the same time period. Show your derivations.

Read the article found here, in which Bernie Sanders defends a bill that he has introduced that would allow for the import of pharmaceuticals into the U.S. from Canada. This would effectively force drug manufacturers to charge the same price for prescription drugs in the U.S. and Canada. In this problem,

you will assess one possible consequence of this legislation. Suppose that a drug that treats hepatitis C has a constant marginal cost to produce, equal to $1. The average variable cost of producing the drug is also $1. Suppose that demand for this drug is the same in both the United States and Canada and is given by รฐยย‘ยƒรฐยยยท=2000. The drug's manufacturer still holds a patent on the drug and thus is effectively able to act as a monopolist. Initially, the U.S. forbids the import of the drug from Canada. This allows the drug's manufacturer to charge different prices in the U.S. and Canada. In Canada, the Canadian government manages a single payer healthcare system, which means that the Canadian government, in effect, makes all of Canada's purchases of healthcare on behalf of its citizens. This gives the Canadian government the ability to set the price of all healthcare products and services within its borders, including that of the hepatitis C drug. Suppose that the Canadian government requires the drug manufacturer to price at a marginal cost within Canada. In the U.S., drugs are priced in the market. This leaves the drug manufacturer is free to act as a monopolist in the United States.

a.) What price will the manufacturer charge in the U.S.?

b.) What quantity of the drug will be sold in the U.S., and what quantity of the drug will be sold in Canada?

c.) Compute the deadweight loss caused by the drug company's monopoly power in the U.S.

d.) Compute the drug manufacturer's total variable cost and total revenue.

e.) Now suppose that the U.S. allows imports of the drug from Canada, forcing the U.S. price and the Canadian price to be equal. If the Canadian government continues to impose marginal cost pricing, what will the manufacturer's total variable cost and total revenue be?

f.) Suppose that the drug company must pay a fixed cost of $500,000 to develop the hepatitis C drug before it can be manufactured and sold. Will it pay this cost if imports of the drug are restricted between the U.S. and Canada? Will it pay this cost if they are not?

g.) Explain why, in this scenario, the U.S. is providing a public good and Canada is free riding.

Using the Malthusian Model as a framework, consider the implication of Hurricane Katrina for the New Orleans region. In particular, show under what combination of circumstances it might lead to an increase in GDP per capita and/or in what circumstances it might lead to a decrease in GDP per capita. What would happen in the long run for the respective scenarios?

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