ECON 2 Final: Economics 210A UCSB FinalExam 2015

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Answer question 1 and any 5 of the remaining 6 questions: the island nation of san felicidad has n skilled workers and n unskilled workers. A skilled worker can earn per day if she works all the time and an unskilled worker can earn per day if he works all the time. A worker who can earn w per day and spends the fraction of his or her time not working will earn (1 )w per day. There is a single consumption good, which is the numeraire. Preferences of all workers are represented by the utility function. U (c, ) = ln c + ln (1) where c is the amount of the consumption good consumed per day and is the fraction of the consumer"s time that is spent not working. 1: a politician who opposes taxing the rich says that redistributive taxes harm the economy.

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Woody lives in Houston, and works at a college restaurant where the minimum wage per hour, w, is paid. The current minimum wage rate per hour is $8. Woody allocates his daily hours either for working or for leisure. That is, for the total 24 hours he has a day, he can choose to work (denoted as H), or do other things (denoted as L). If he works, all the money he earns, w x H, is spent on his consumption. Saving is not poosible. Both consumption and leisure are goods for him.

Woody's utility function is
U(L,C)= Squre root of CL²
MU_C=L/(2*Square root of C)
MU_L=Sqaure root of C

a) Derive Woody's MRS function. What is the MRS at (L,C) = (20,32)? State the meaning of MRS in terms of leisure and consumption.

b) Derive Woody's budget constraint equation. (Hint: C=w x H, and the total hours a day is 24)

c) What is Woody's optimal (L^*,C^*) and utility level U^*? How many hours does Woody work each day? Clearly state the utility maximization condition.

Read the articles and consider two people, Mon and Shaman, that can produce 2 goods, shrimp and mobile apps.

If Mon and Shaman devoted themselves to shrimp and mobile app production, the chart below shows how much each person can produce per hour.

Complete the first table by showing how many shrimp and mobile apps each person would produce if they did not specialize.

	Hours worked per year			Total amount produced if each person devotes all their working hours per year to each good.
		Shrimp per hour	Mobile Apps per hour	Total Shrimp	Total Mobile Apps
Mon	3500	50	1
Shaman	2000	10	5

In a world hungry for cheap shrimp, migrants labor overtime in Thai sheds

By Jason Motlagh, Published: September 19, 2012

Jason Motlagh/For The Washington Post - Burmese migrant workers peel shrimp at a processing factory in Samut Sakhon province in Thailand. High standards allow the factory to export its seafood to the United States.

MAHACHAI, Thailand â At an age when she should have been in a classroom, Thazin Mon discovered her knack for peeling shrimp. To help support her Burmese migrant family, the 14-year-old pulled 16-hour shifts, seven days a week, for less than $3 a day. âI am uneducated, so I work. I have to work bravely,â she says.

Although she was the best peeler in the factory, speed was never enough. Mon was beaten if she slowed down, she said, and when she asked for a day off to rest hands swollen with infection, her boss kicked her and threatened rape.

Thanks to a bottomless appetite for cheap shrimp in the West, Burmese migrants such as Mon are the backbone of a Thai shrimp industry that is the worldâs third largest. The United States is Thailandâs top customer, accounting for a third of the countryâs annual shrimp exports.

Rights groups say that overseas demand for shrimp products in greater volume has fueled a culture of exploitation in the Thai industry. They insist that the failure of foreign companies to sufficiently verify the origin of the shrimp they import allows abuses to persist.

âIf you look at the cost of shrimp overseas, itâs very, very cheap, and that comes from the exploitation inherent in the shrimp industry,â says Andy Hall, an expert on migration at Mahidol University who tracks Burmese labor in the Thai seafood industry.

Brisk business with major U.S. retailers such as Wal-Mart, Costco, Samâs Club and Red Lobster pumps more than $1 billion in revenue each year into the Thai economy, the second largest in Southeast Asia. As Thai living standards have risen, a shortage of unskilled labor has attracted tens of thousands of Burmese migrants looking to escape the poverty and job scarcity that has gripped their homeland for decades.

Most head to Samut Sakhon province, the heart of the processing industry just south of the capital, Bangkok, where modern facilities line the highway alongside fast-food chains and car dealerships. The more prominent factories are the size of football fields, with neon signage and billboards that feature smiling children. But thereâs a darker side behind the scenes, activists say.

Of an estimated 400,000 migrants at work in the province, only about 70,000 are legally registered. The rest are employed illegally in anonymous peeling sheds that supply the larger companies that must fill massive orders from abroad. At this lower end of the supply chain, according to migrant activists, crooked brokers and employers trap scores of Burmese in abusive conditions tantamount to slavery, particularly in the shrimp industry.

âThe small factory owners know that most of their workers are undocumented, so they can control the workforce however they want â such as locking workers in until they finish their work,â says Sompong Sakaew, a labor activist based in Mahachai, the provincial capital. âThere are also teenagers between 12 and 17 years old in the workforce.â

Sold into waking nightmare

Problems for Burmese migrants typically start as soon as they link up with brokers who promise steady work and a decent salary, only to sell them into a nearly inescapable cycle of debt bondage.

Min Oo, 28, a Burmese farmer who lost his home in a flood, said he paid a broker the equivalent of $500 to smuggle him across the border to Samut Sakhon, with the guarantee of a minimum-wage (about $10 a day) factory job. Instead, he said, the broker sold him into a waking nightmare, with 18-hour workdays in a shrimp-processing factory and net earnings of no more than $20 a week, leaving almost nothing to send home.

In some cases, migrant workers and rights groups allege, police officials or their relatives hold an ownership stake in unregistered peeling sheds. More commonly, the critics say, the authorities or those they protect shake down undocumented workers for bribes to supplement their incomes, knowing that the migrants would rather pay up on the spot than be deported to Burma.

Despite occasional police action and robust anti-trafficking laws, Sakaew, the labor activist, estimates that fully a quarter of the 1,200 to 1,300 factories in Samut Sakhon province are unregistered and, therefore, ripe for abuse. With so much profit-induced apathy on the Thai side, activists say reform pressure must come from Western companies whose trade partnerships drive the shrimp industry.

Codes of conduct

It is difficult to establish precise links between the larger Thai companies that process shrimp of dubious origin and the Western companies whose consumers increasingly demand ethical sourcing.

To do business overseas, Thai companies must qualify for membership in the Thai Frozen Foods Association, which adheres to globally recognized codes of conduct and carries out unscheduled inspections. Spokesman Arthon Piboonthanapatana asserts that anyone found guilty of labor -abuses would be expelled. In more than three years of inspections, he said, this has never happened.

âIf the shrimp is from TFFA members, I can 100 percent guaranteeâ that it is produced without labor exploitation, he said.

But critics say that until the Thai shrimp industry requires larger factories to provide records of lower-level suppliers and follows through with random inspections, the shrimp it exports will remain tainted by human trafficking and labor abuses.

For the past three years, the State Department has given Thailand a poor grade on human trafficking, citing it among countries that do not fully comply with the minimum standards for efforts to combat the problem.

After the release of the departmentâs report in 2012, Thai Foreign Minister Surapong Tovichakchaikul said his country would improve its performance by strengthening cooperation among agencies tasked with fighting human trafficking.

Motlagh reported with a grant from the Pulitzer Center on Crisis Reporting.

More world news coverage: - Turmoil in Egypt stalls talks on U.S. aid - Suicide blast kills 12 near Afghan capitalâs international airport - U.S. troops to cut missions with Afghan forces - Read more headlines from around the world.

Google reportedly acquiring Waze app for $1.3 billion

News ends months of rumors on deals with Apple, Facebook, or Google, according to Globes; Waze source refuses to comment

By David Shamah June 9, 2013, 7:20 pm

Waze co-founder Uri Levine at a Jerusalem conference in May (photo credit: Flash90)

After dating at least three of the biggest tech companies in the world, it appeared Sunday night that Waze was finally getting the ring â one worth $1.3 billion, according to a report in the Israeli business newspaper Globes.

Thatâs the sum Google has reportedly agreed to pay for Waze, the Raâanana-based crowdsourced driving and navigation app with 50 million users around the world. The figure is $300 million higher than Facebook reportedly offered to pay for the firm earlier this year.

A company source contacted by The Times of Israel had no comment on whether talks with Google (or any other party) were on or off. âWe donât comment on rumors and speculation in general,â the source said.

The purchase, reported by Globes citing an anonymous source, would be the biggest buyout yet for an Israeli consumer firm, far outstripping Face.comâs $60-million sale to Facebook last year. Indeed, it is believed that it would be the biggest sum paid for any app, ever.

In May, it was rumored that Facebook had offered nearly $1 billion for Waze, but negotiations broke down several weeks later, apparently over Facebookâs insistence that Waze move its R&D from Israel to one of Facebookâs existing facilities, in the US or Britain. Several weeks later, it was reported that Google was interested in Waze, and that the search giant had offered as much as $1 billion for the company as well.

Previous rumors â earlier this year â had Apple as a prospective Waze buyer, with an offer of $400 million for the Israeli company.

A Google-Waze deal would likely not get snagged over location; Google already has several large R&D facilities in Israel, and employs hundreds of engineers here. Integrating the already existing Waze group into the Google infrastructure would be much simpler than getting Waze integrated with Facebook, local social media expert Yotam Tavor told The Times of Israel.

However, it appears that location wasnât the only issue. As recently as several weeks ago â amid the rumors that Google was poised to make an offer for Waze â company insiders were quoted in news reports as saying that members of the Waze board of directors believed that they would be selling themselves short if they âsettledâ for $1 billion â and that they could raise much more with an IPO. How much Waze would fetch in an IPO isnât clear, but if the latest report is true, Google apparently agrees with the Waze officials opposed to a sale.

Google already has its own mapping and driving app, and competes with Waze, but the latter dominates in most of the markets where Googleâs Navigator app is used. As such, Google and Waze are competing in the same space, but most users agree that the Waze app is much more elegant and user-friendly than the Google one.

In addition, Waze has built an active and loyal social network, which is highly engaged with the app, as well as a built-in mobile ad platform. In its latest version, it supplies Google Maps-like recommendations â making it a perfect match for Google, Tavor said.

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	The Outcome Without Trade		The Outcome With Trade				The Gains From Trade
	What they Produce and Consume if they do not specialize according to comparative advantage.		What They Produce if they fully specialize in one good.	What They Trade	What They Consume		The Increase in Consumption
Mon	1.)	Point A	5.)	9.) 10.)	13.)	Point A^*	17.)	A to A^*
	2.)		6.)		14.)		18.)
Shaman	3.)	Point B	7.)	11.) 12.)	15.)	Point B^*	19.)	B to B^*
	4.)		8.)		16.)		20.)

Suppose Mon and Shaman do not specialize according to comparative advantage and exchange but instead choose to be self-sufficient.

Further, they devote half of their hours in each year to each good and they consume everything they produce domestically.

After specialization according to comparative advantage, they exchange 5,000 apps for 75,000 shrimp.

Compute values for the numbered cells.

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What is the opportunity cost of producing shrimp for Mon?

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What is the opportunity cost of producing shrimp for Shaman?

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What is the opportunity cost of producing Mobile Apps for Mon?

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What is the opportunity cost of producing Mobile Apps for Shaman?

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1.) Before specialization, how much shrimp will Mon produce?

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2.) Before specialization, how many mobile apps will Mon produce?

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3.) Before specialization, how much shrimp will Shaman produce?

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4.) Before specialization, how many mobile apps will Shaman produce?

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5.) If they specialize according to comparative advantage, how much shrimp will Mon produce?

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6.) If they specialize according to comparative advantage, how many mobile apps will Mon produce?

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7.) If they specialize according to comparative advantage, how much shrimp will Shaman produce?

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8.) If they specialize according to comparative advantage, how many mobile apps will Shaman produce?

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9.) After specialization according to comparative advantage, they exchange 5,000 apps for 75,000 shrimp, i.e. each country sells some of the good in which they have a comparative advantage for the good in which they have a comparative disadvantage.

How much shrimp will Mon trade?

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10.) How many mobile apps will Mon trade?

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11.) How much shrimp will Shaman trade?

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12.) How many mobile apps will Shaman trade?

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13.) After trade, how much shrimp will Mon consume?

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14.) After trade, how many mobile apps will Mon consume?

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15.) After trade, how much shrimp will Shaman consume?

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16.) After trade, how many mobile apps will Shaman consume?

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17.) After trade, Monâs shrimp consumption increased by how much?

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18.) After trade, Monâs mobile app consumption increased by how much?

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19.) After trade, Shamanâs shrimp consumption increased by how much?

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20.) After trade, Shamanâs mobile consumption increased by how much?

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What is the total amount of shrimp produced if Mon fully specializes in shrimp production?

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What is the total amount of shrimp produced if Shaman fully specializes in shrimp production?

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How many mobile apps will Mon produce if she fully specializes in producing mobile apps?

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How many mobile apps will Shaman produce if he fully specializes in producing mobile apps?

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raspberrytiger386

Michael spends all of his income on coffee and donuts. A coffee costs $2.50 and a donut costs $2.00. At his current consumption level, the marginal utility for coffee is 30 utils, and the marginal utility for a donut is 60 utils. Which statement best describes what Michael needs to do to maximize his utility?

Question 1 options:

1)	buy less of both coffee and donuts.

2)	buy less coffee and more donuts.

3)	buy more coffee and less donuts.

4)	spend the same amount on coffee as he does on donuts.

Question 2

What is it called when the marginal utility derived from the last dollar spent on each good is the same across all goods and the last dollar spent uses all of the available budget for the purchase of those goods?

Question 2 options:

1)	the optimal consumption bundle.

2)	the optimal production bundle.

3)	diminishing marginal utility.

4)	optimal point.

Question 3 (1 point)

What does the economic theory of marginal utility infer?

Question 3 options:

1)	consumers naturally know which consumption choices will maximize their utility.

2)	consumers who watch market trends are better at maximizing their utility than are those who do not watch those trends.

3)	one cannot maximize utility without taking an economics class that explains utility theory.

4)	one cannot maximize utility without doing the math of calculating the ratios of marginal utility divided by price.

Question 4

Kate is addicted to chocolate and does not care how much it costs. In fact, she spends more than $20 a week on chocolate. What can be concluded about elasticity in her buying decisions?

Question 4 options:

1)	Her income elasticity of demand for chocolate is equal to one.

2)	Her income elasticity of demand for chocolate is equal to zero.

3)	Her price elasticity of demand for chocolate is equal to one.

4)	Her price elasticity of demand for chocolate is equal to zero.

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Question 5 (1 point)

Why does the demand for a good become relatively more elastic?

Question 5 options:

1)	substitutes for the good become more available.

2)	substitutes for the good become less available.

3)	the good becomes more of a necessity.

4)	the time allowed for adjustment is shortened.

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Question 6 (1 point)

Assume the price of chicken per pound is $3.49 and that Americans purchase 10 million pounds per chicken every month. If the price of chicken increases to $5.49 per pound, identify what will occur to consumer surplus?

Question 6 options:

1)	consumer surplus increases.

2)	consumer surplus decreases.

3)	consumer surplus creates incentive to save.

4)	consumer surplus creates incentive to spend.

Question 7 (1 point)

What is another name for the difference between the price that consumers are willing to pay for a good and a lower price that they may actually have to pay?

Question 7 options:

profit.

revenue.

3)	consumer utility.

4)	consumer surplus.

Question 8

Adam, Brian, Robert, and Sam all want to attend a football game. The admission price is $48. Adam is willing to pay $59 for the ticket. Brian is willing to pay $39. Robert is willing to pay $45, and Sam is willing to pay $55. Based on this information, who will go to the game?

Question 8 options:

1)	Adam, Brian, Robert, and Sam.

2)	Brian and Robert.

3)	Adam and Sam.

4)	Brian, Robert, and Sam.

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Question 9 (1 point)

Lily is willing to pay $10 for one bracelet and $5 for a second. Patty is willing to pay $12 for one bracelet and $2 for a second. If the price is currently $8 per bracelet, identify what is the total consumer surplus after Lily and Patty make their purchases?

Question 9 options:

Question 10 (1 point)

Manfred is willing to shovel one driveway for $25, a second for $30, and a third for $35. Assume that the market rate for shoveling driveways is $32. How many driveways will Manfred shovel, what will be his total revenue, and what will be his producer surplus?

Question 10 options:

1)	Manfred will shovel two driveways for a total revenue of $64 and his producer surplus will be $9.

2)	Manfred will shovel three driveways for a total revenue of $75 and his producer surplus will be $12.

3)	Manfred will shovel three driveways for a total revenue of $96 and his producer surplus will be $5.

4)	Manfred will shovel four driveways for a total revenue of $125 and his producer surplus will be $18.

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Question 11 (1 point)

What would the difference between the price that producers receive and the lower price at which they are willing to sell the good be called?

Question 11 options:

1)	producer shortage.

2)	producer surplus.

3)	consumer shortage.

4)	consumer surplus.

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Question 12 (1 point)

What will happen when there is an increase in the price of eBook downloads?

Question 12 options:

1)	It reduces the marginal utility derived from each dollar spent on eBooks.

2)	It reduces the marginal utility derived from each hardcopy book purchased.

3)	There will not be a substitution effect.

4)	There will not be a change in the number of eBooks in the set of consumption possibilities.

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Question 13 (1 point)

When is price elasticity of demand utilized to measure how an individual changes the quantity they demand?

Question 13 options:

1)	when supply changes.

2)	when product quality changes.

3)	when marketing changes.

4)	when price changes.

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Question 14 (1 point)

Assume Mary consumes only tea and pastries. A cup of tea costs 5 euros and a pastry costs 8 euros. Her weekly income is 450 euros. Mary always drinks 2 cups of tea for every pastry she consumes. What is Maryâs optimal weekly consumption bundle?

Question 14 options:

1)	25 cups of tea and 50 pastries.

2)	50 cups of tea and 25 pastries.

3)	58 cups of tea and 20 pastries.

4)	60 cups of tea and 30 pastries.

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Question 15 (1 point)

When is producer surplus a positive value?

Question 15 options:

1)	the price the producer is willing to charge equals the market price.

2)	there is no tax applied to the good.

3)	the price the producer is willing to charge is less than the market price.

4)	the price the producer is willing to charge is greater than the market price.

ECON 2 Final: Economics 210A UCSB FinalExam 2015

ECON 2 Full Course Notes

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