EBK MICROECONOMICS
EBK MICROECONOMICS
4th Edition
ISBN: 8220103647830
Author: KRUGMAN
Publisher: MAC HIGHER
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Chapter 2, Problem 14P
To determine

The mayor of Gotham city, worried about the potential epidemic of deadly influenza this winter, ask an economic adviser the following series of questions. Determine whether a question requires the economic advisor to make a positive assessment or a normative assessment.

  1. How much vaccine will be in stock in the city by the end of November?
  2. If we offer to pay 10% more per does to the pharmaceutical companies providing the vaccines, will they provide additional doses?
  3. If there is a shortage of vaccine in the city, whom should we vaccinate first-the elderly or the very young? ( Assume that a person from one group has an equal likelihood of dying from influenza as a person from the other group)
  4. If the city charges $25 per shot, how many people will pay?
  5. If the city charges $25 per shot, it will make a profit of $10 per shot, money that can go to pay for inoculating poor people. Should the city engage in such a scheme?

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1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.
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