Microeconomics Question from Walter E. Williams:Edit
Using elementary economic theory, write short explanations to the following statements:
- (a) Tourists must be more careful buying Maine lobsters in Maine than buying Maine lobsters in Philadelphia.
- (b) There are proportionally fewer members of minority groups employed in regulated industries than in unregulated industries.
- (c) Fishing in the ocean leads to too many resources being devoted to fishing. (First explain what is meant by too many.)
- (a)True. Tourists in Maine have a more inelastic demand curve for Maine lobsters than do tourists in Philadelphia due to lack of information. The results is that a higher price will can be charged to tourists in Maine than to locals because the tourists lack the information on what a Lobster can be purchased for by the locals. The lobsters purchased in Philly will be sold at one price – the price that the locals are willing to pay for a Maine lobster. Tourists will also face this price, as it will not generally be possible to discriminate between a local and a tourist.
- (b)Regulated industries are those which have price controls in place (normally minimum wage and non-pecuniary compensation controls), as well as restrictions on the dismissal of an employee who is not performing. Therefore, a job will not be offered to a marginal or less skilled person because the wage can not be adapted/lowered to fit that person’s skill level. Furthermore, a job will not be offered to a person who is questionably qualified, as the cost of terminating the employment is very high. Generally speaking, this type of a system tends to favor white males who have skills and a solid tack record, while preventing minority groups from obtaining on the job training to acquire the necessary skills and track record needed to earn the higher wages.
- (c) WEW-031 part a
- WEW-067 part a
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