Reference no: EM131404236

Assignment: Gains from Trade & Markets

1) Suppose Wisconsin and Minnesota each have 100 workers available for either dairy farming or cookie baking. The maximum production possibilities per worker for each good are listed in the following table: (so, the way to read this is that if a Wisconsin worker spent all their time cookie baking, they could make two dozen cookies, OR if they spent all their time dairy farming they could make 6 gallons of milk)

	Wisconsin	Minnesota
Milk	6 gallons	2 gallons
Cookies	2 dozen	6 dozen

a) Graph the production possibilities frontier (PPF) for each state (assume that opportunity costs are constant at all quantities so that the PPF is a straight line rather than a curve in this case)

b) Can this economy ever operate outside its PPF? Why or Why not?

c) What does it mean if we say that this economy is operating inside its PPF?

d) How would you show what happens to the PPF if a disease kills half the cow population? How would you show what happens to the frontier if hormones are given cows that enable them to produce more milk per day. Can this economy now produce more milk, more cookies,
or more of both goods? Explain

e) Which state has the comparative advantage in milk production? In cookie production? How do you know this?

f) Describe how trade between the two states can enable both to consume levels of milk and cookies that would be unattainable without trade. Is there a trading price they could both agree on? Feel free to use a numerical example if that helps.

2) Writing Assignment: (2-3 pages total for these three questions)

a) Read the attached short Washington Post article entitled "Georgetown student advertises for a personal assistant." Describe the basic situation outlined in the article and discuss whether you think this is a legitimate opportunity to benefit from division of labor and differences in opportunity cost. What is the trade being executed here, and do you think this is a fair market exchange? Discuss

b) Read the attached article from The Economist magazine called "The Zero-Sum President."

This article analyzes some of President Obama's comments several years ago in the State of the Union address last year. We've seen similar comments recently from President Trump, so this tends to be a common talking point by political leaders. Summarize the main argument of the story in a sentence or two. Given what we've learned so far about trade, do you agree with their points? Should there always be winners and losers in trade? Discuss.

c) Summarize the key points of what we've learned about the benefits and downsides of free trade and market exchange for a society and/or an individual. What are your current feelings about the views of Smith, Ricardo, Malthus, and others on trade and how would you approach answering a friend or family member who asked you about current political proposals to end trading agreements such as NAFTA or the European Union?

Article: Georgetown student advertises for a personal assistant By Jenna Johnson

Georgetown University sophomore Charley Cooper is busy. He has a full load of classes, hours of homework and a part-time job at a financial services company. He's also worried about an illness in the family. And then there are all the other time-consuming aspects of college.

The solution? A personal assistant.

Cooper, 19, logged on to the university's student employment Web site last week and posted an ad for someone to tackle "some of my everyday tasks," such as organizing his closet, dropping him off and picking him up from work, scheduling haircuts, putting gas in the car and taking it in for service, managing his electronic accounts and doing laundry (although the assistant will be paid only for the time spent loading, unloading and folding clothes, not the entire laundry cycle).

The successful applicant can expect to work three to seven hours a week and make $10 to $12 an hour, although "on occasion it will be possible to work additional hours and/or receive bonuses at my discretion." Preference will be given to Georgetown undergraduates, Cooper says in the listing, and the assistant can spread his or her tasks throughout the day.

"As my PA you will receive an email once a day by 9:00 am with a task list for that day and a time estimate for each task," Cooper wrote in the job listing, which was first reported by the student newsmagazine, Georgetown Voice. "Important tasks will be bolded on the list and must be done that day (even though everything on the list should theoretically be finished on a daily basis). At the end of the day you will send me an email telling me what tasks are incomplete or that all tasks have been completed."

Could this be a publicity stunt? Cooper said in a Facebook message to a reporter that he is completely serious and has heard from several interested students, in addition to a few prank applicants. A university spokesman confirmed that Cooper is a student and has posted the job listing.

Cooper would answer questions only through messages sent to his Facebook account, which features a photo of a man in a striped polo shirt holding a champagne flute. He provided only brief details about himself, his family and his job: He grew up in Bethesda and graduated from the Landon School, a private boys school, in 2008. He lives in the dorms and hasn't declared a major but is planning to double-major in finance and management, perhaps with a minor in Spanish. His Linked-In profile says he is considering jobs in finance, entertainment or both. In the spring, he got a part-time job in the D.C. offices of a financial services company that he didn't want to identify, where he works as an assistant and manages a team of interns.

Cooper said he decided to post the help-wanted ad after a family member had a cancer diagnosis and began to make arrangements for treatment at Georgetown University Hospital. Cooper says he hopes to start interviews in a few days, after the craziness of midterms has passed. "I know that if I didn't already have a job, I would definitely be interested in a job that pays 10 to 12 dollars per hour and is flexible in terms of hours," he said.

The Georgetown Voice posted the listing on its blog Friday under the headline, "Georgetown sophomore seeks personal assistant, takes premature self-importance to whole new level." Soon, dozens of derogatory comments popped up accusing Cooper of furthering the stereotype that Georgetown is filled with wealthy kids who can't do anything for themselves.

"Everybody probably knows who he is now," said Sarah Murphy, 19, a sophomore English major who heard about the job listing from friends. "People are not happy. They think he's just ridiculous and full of himself."

But other students were more understanding. "Listen, I think if there's a market for it, and someone wants to do it, all the more power to him," said Corey Sherman, 20, a junior international politics major who has two jobs. "Maybe he just wants the personal touch -- knowing the human being folding his underwear." (Earlier in the week, a Georgetown junior posted a similar job listing, according to the Georgetown Heckler, a campus humor blog. The student did not respond to an e-mail Thursday and it could not be determined whether the listing was a parody.)

Although the posting created buzz, outsourcing dull duties is not a new thing at Georgetown or other universities. Some students pay to have their group houses or apartments cleaned, or contract with Soapy Joe's, a company that will pick up dirty laundry from the dorms and return it clean and folded within days.

Still, springing for a personal assistant is "definitely out of the ordinary," said Bonnie Low-Kramen, the longtime personal assistant to actress Olympia Dukakis. Low-Kramen teaches workshops to aspiring celebrity personal assistants and wrote a book titled "Be the Ultimate Assistant."

"Whenever someone gets wealthy or famous, things can fall through the cracks," she said. "There's no chance someone like Scarlett Johansson or Angelina Jolie end up on all of those covers without a team of people."

But college students are rarely mature enough to handle the responsibility of managing a personal assistant, said Low-Kramen, whose son is a senior at the University of Maryland (and does not have a personal assistant).

"There's a benefit to learning to do things on your own," she said. "I know -- college is stressful, there's a lot to do. But the pressures are still nowhere near needing a personal assistant."

Trade

The zero-sum president by R.A. | LONDON

STATE of the Union addresses tend to be long, winding affairs, filled with a grab bag of policy ideas that will alternatively appeal to and irk people across the political spectrum. Barack Obama's latest address had plenty of sensible ideas in it: tax reform, including reductions in corporate rates; more spending and accountability on education and infrastructure investment; streamlining of the regulatory environment; and so on. He led off, however, with a call for a reshoring of manufacturing jobs seemingly calculated to cost him The Economist's endorsement. Granted, annoying The Economist is, almost definitionally, good politics. For a president whose hallmark has been soaring orations promising hope, however, Mr Obama's take on the global economy is strikingly bleak and depressing.

The president was not so unreasonable as to suggest that the American economy could recapture all of its lost manufacturing jobs. Nor was he wrong to point out that countries like China have used direct subsidies, financial shenanigans and currency manipulation to give their exporters a leg up. Yet at no point did he attempt to justify the unstated assumption that what America ought really to do is develop an economy like China's-a place, recall, scarcely one-sixth as rich as America, riddled with potentially debilitating economic imbalances, and governed by an unaccountable monopoly of a communist party. Perhaps more distressing, he implied in several places that the reason to become more like China was that only by doing so could America defeat China, and others, at economics. Consider the line:

Our workers are the most productive on Earth, and if the playing field is level, I promise you - America will always win.

Leaving others, one is forced to conclude, to lose-not once, not occasionally, but always. And what is likely to be the outcome of unending defeat? Destitution? Are we to hope that other countries are left with no gainful employment opportunities at all? If that means dreadful poverty, then Mr Obama ought to be dragged before an international tribunal. But maybe it's not so bad, in which case we have to wonder why it's so damned important to "win" whatever contest it is we're having. Is the implication that it's possible to get by all right, to not be poor, without having lots of demanding manufacturing jobs? That doesn't sound so bad, actually; are we sure America doesn't want to sign up for that? Of course, if this is the nature of economic activity, and if America is determined to defeat other countries, it's worth asking whether it wouldn't make sense to deliberately sabotage other places, or bomb them; after all, it's hard to lose to a country whose people are dead. On the other hand, if victory is so important, we might expect other countries to retaliate, or preemptively attack. Maybe it would be better if the world divided itself into two competing but fairly isolated factions locked in a sort of "cold war".

Later, the president added:

Don't let other countries win the race for the future.

The context, innocuously enough, was in calling for greater support for American research and development efforts. But the language of this statement is either daft or ghastly, depending on how charitably one is willing to read it. Is Mr Obama so dense as to miss that when America invents things other countries benefit, and vice versa? If a German discovers a cure for cancer, shouldn't we be ecstatic about that, rather than angry? Indeed, shouldn't we be quite happy and interested in ensuring that Germans and Britons and Indians have the capability and opportunity to develop fantastic new technologies? In the more nefarious reading, Mr Obama seems to accept that only relative standing really matters. A sick, poor world in which America always triumphs is preferable in all cases to one in which America maybe doesn't "win" the race to discover every last little thing that's out there to be discovered. And hell, one has to ask again whether the easiest way to prevent other countries from winning the race for the future isn't simply to blow up their labs.

Look, I understand the forgiving interpretation of these remarks. Americans are motivated by competition and patriotism, and if that's the only way to rally the country behind fundamentally sound policies like subsidies for basic research, then that's the card you play. And, in practice, Mr Obama's reforms will probably not do much more than offset the crummy, mercantilist choices made by other governments elsewhere. No one is talking about going back to the early 19th century, or to the days of communist containment.

I don't see that that's an acceptable excuse. People who live outside of America are people just like Americans, and we should all rejoice in their rising prosperity, the more so when it occurs through additions to the stock of human knowledge that will benefit people everywhere. If an American president can't communicate that simple idea to his citizenry, out of fear that he'll be drummed out of office on a wave of nationalistic outrage, then he doesn't deserve to be president and his country doesn't deserve to win a damned thing, least of all the right to call itself "exceptional", a beacon of hope and freedom. A zero-sum world is a world without hope, and if Mr Obama is convinced that's what we're in then I don't see much need for him to stick around.