1. Equilibrium discrimination and crowding. Suppose there are two occupations, economists and psychologists.
a) Draw hypothetical supply and demand graphs for men and women to both occupations assuming that some of each gender preferseach job. Now, assume that discriminatory actions take place preventing men from becoming psychologists. Show the effects of discrimination on your graph.
b) Who benefits and who loses from this discrimination? Show the effect of discrimination on wages and employment in both occupations and on total output in each. (Hint: have one graph for economists, and a separate one for psychologists.)
c) Are there circumstances where the government should notprevent discrimination?
2. Long-run competition. Most of the cost of a new airplane is in the research and development and in building production facilities. By contrast, the marginal cost of producing another plane is relatively low.
a) You have been hired by Boeing to recommend pricing and marketing strategies for a new plane. On one graph: Draw a hypothetical Average Total Cost (ATC) curve, the Marginal Cost curve, and a Demand (MU) curve for the plane. (Hint: The point where Demand intersects MC should be below the ATC curve.)
b) Show the area of net profit (or loss) under perfect competition for planes as the difference between average total cost and the average revenue (or the price). (Note that Boeing’s profit is the number of phones sold times price minus ATC.) What will happen to the price of planes, to sales, and to profits when Airbus comes out with a new plane?? What happens to the industry and the number of companies under competitive conditions? Why?