AB224 Unit 2 Assignment
1. A representative of the American clothing industry recently made the following statement: “Workers in Asia often work in sweatshop conditions earning only pennies an hour. American workers are more productive and as a result earn higher wages. In order to preserve the dignity of the American workplace, the government should enact legislation banning imports of low - wage Asian clothing.”
a. Which parts of this quote are positive statements? Which parts are normative statements?
b. Is the policy that is being advocated consistent with the preceding statements about the wages and productivities of American and Asian workers?
c. Would such a policy make some Americans better off without making any other Americans worse off? That is, would this policy be efficient from the viewpoint of all Americans?
d. Would low - wage Asian workers benefit from or be hurt by such a policy?
e. What would shoppers see when they shopped in Wal-Mart and the other “big box” stores that sell so many imported items?
f. Would this tax policy have a better effect, worse effect, or no different effect on American workers than the legislation banning the imports discussed in question 1? What kind of effect would the tax have on the Asian workers?
2. In the ancient country of Roma, only two goods, spaghetti and meatballs, are produced. There are two tribes in Roma, the Tivoli and the Frivoli. By themselves, the Tivoli each month can produce either 30 pounds of spaghetti and no meatballs, or 50 pounds of meatballs and no spaghetti, or any combination in between. The Frivoli, by themselves, each month can produce 40 pounds of spaghetti and no meatballs, or 30 pounds of meatballs and no spaghetti, or any combination in between.
3. According to the U.S. Census Bureau, in July 2006 the United States exported aircraft worth $1 billion to China and imported aircraft worth only $19,000 from China. During the same month, however, the United States imported $83 million worth of men’s trousers, slacks, and jeans from China but exported only $8,000 worth of trousers, slacks, and jeans to China. Using what you have learned about how trade is determined by comparative advantage, answer the following questions.