The following problems allow you to apply your knowledge gained about microeconomics this week. Provide a paragraph or two in a Word document for each of the questions provided and explain your answers.
Professional athletes command and receive higher salaries than teachers. Yet teachers, not athletes, are considered essential to economic growth and development. Why then do athletes receive higher salaries than teachers?
The dean at Middle State University knows that poets generally earn less than engineers in the private market; that is, the equilibrium wage for engineers is higher than that for poets. Suppose that all colleges and universities except for Middle State University pay their professors according to their potential private market wage. The administration at Middle State believes that salaries should be equal across all disciplines because its professors work equally hard and because all of the professors have similar degreesâ€”Ph.D.s. As a result, Middle State opts to pay all its professors a mid-range wage, WMS. What do you think is likely to happen to the engineering and poetry programs at Middle State?
Why does internalizing externalities with taxes or subsidies sometimes increase the prices of goods and sometimes decrease them? When would workers in an industry benefit from internalizing its externalities?
A factory releases air pollutants that have a negative impact on the adjacent neighborhood (populated by 2,000 households). If the government could assign property rights to the air to either the factory or to the residents of the neighborhood, would this make a difference in the quantity of pollution generated? Explain.