Economics for Leaders
Lesson 4: Markets In Action
Economics for Leaders
1 vs. 100
EFL - Style
Economics for Leaders
All problems mentioned in the
guidelines and sugggestions are
included here. Choose the
problems you like but please make
sure that students practice at least
3 different analysis problems.
Economics for Leaders
Economics 1 vs. 100
Sit with a partner. Your team will start with
$3 to play 3 rounds.
Each question is worth $1. If you answer
the question correctly, you keep your $. If
you answer is incorrect, you forfeit your $.
Answers must be in written form and
complete when time is called.
Decisions of the judges are final re:
whether your answer is correct.
Every team must play every round. There
are no drop-outs, only forfeiture of $1.
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Round 1
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Ethanol & Tortillas
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1. Why is the price of tortillas increasing?
A. Big restaurant chains have Big restaurant
chains have driven up prices by adding tortillas
to their menus.
B. Farmers have had a bad year with weather in
the Midwest, so there is less corn available.
C. Trade agreements between Mexico and the US
have set a high price on corn in both countries.
D. The demand for corn by ethanol producers has
increased.
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2.
Restaurants in Mexico have announced higher
prices for tortillas in the past year. How do
we explain these announcements in an open
market?
A. Because the demand for tortillas has decreased
in favor of other foods, restaurants face higher
marginal costs of production.
B. Because the supply of tortillas has decreased,
restaurants face higher marginal costs of
production.
C. Demand for tortillas is increasing, which raises
the market price that restaurants must charge.
D. Demand for tortillas is decreasing so
restaurants make up for lost revenue by raising
prices.
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3.
One Mexican consumer was quoted as saying, “…as long as
[tortilla prices don’t] go up like gas prices I think that I
would be ‘OK’ with paying an extra 20 to 25 cents for a
good tortilla.” Can this claim be true for all consumers at
their current quantity demanded? Which of the following
statements about the market is correct?
A.
B.
C.
D.
It cannot be true because it would imply that the
previous price of tortillas was not a market equilibrium
price.
It cannot be true because so many restaurants serve
tortillas that they have a great deal of market power.
It can be true because restaurants keep prices below cost
in order to keep from losing customers.
It can be true because restaurants do not know if or
when the demand for tortillas decreases.
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Round 2
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Minimum Wage
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1.
According to the video, the minimum wage in North
Dakota has not changed in 10 years. If we assume that
the minimum wage was binding on the unskilled labor such
that the equilibrium price of labor would 10% per hour less
than the minimum wage in the market 10 years ago, what
is the effect of that same minimum wage today?
A.
B.
C.
D.
It still contributes to unemployment because it makes
employers pay more than they would if the law didn’t
exist.
It has little or no affect on unemployment or wages
because inflation has likely raised wages above what the
law requires.
It causes poverty in North Dakota because employers
don’t have to pay more than the minimum wage even
though there has been inflation for the past 10 years.
It reduces poverty in North Dakota because it keeps
production costs down and the prices of goods and
services are more affordable.
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2.
In the video, Don Morrison (NDPeople.org) said
the “whole point” is that a higher minimum wage
works its way up, so that skilled workers also
earn higher wages than before. What of the
following would make his prediction inaccurate?
A. The new minimum wage increases unskilled
workers’ demand for training.
B. The new minimum wage increases
unemployment among less skilled workers
C. Skilled workers move out of North Dakota for
higher wage markets.
D. Employers move out of North Dakota for lower
cost labor markets.
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3.
A.
B.
C.
D.
Over 21,000 North Dakotans will be affected by
the new Federal law that raises the minimum
wage from $5.15 to $5.85 per hour. The wage
will rise again in July 2008 to $6.50 per hour
and in 2009 to $7.25 per hour. Which of the
following statements is true about labor
conditions in North Dakota during these
changes?
The 40% increase in minimum wage will
increase incomes of all workers.
The 40% increase in minimum wage will keep
workers and firms from leaving North Dakota.
The supply of labor will increase as people
move to North Dakota seeking higher paying
jobs.
Unemployment rates among lower skilled
workers will increase.
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Round 3
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Ghana and EU Banana
Imports
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1. What is the effect of restrictions on
banana length and weight (i.e.,
bananas must be long and heavy)
on the market for bananas in the
European Union?
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2. Since EU member countries don’t
have commercial banana growers,
why does the EU place such
restrictions on its own consumers?
(Who benefits?)
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3.
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The bananas shown in the video
bear the Fairtrade certification mark
meaning that they have been
produced by small farmer
organizations or in plantations that
meet very high social and
environmental standards. Farmers
who produce Fairtrade Certified
Bananas are guaranteed a floor
price (Fairtrade Minimum Price) to
cover the average cost of
production, and a Fairtrade Premium
of 1US$ per box of bananas to
invest in social and economic
initiatives in their communities.
What effect does FairTrade labeling
have on the quantity demanded for
Fair Trade labeled bananas?
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Negotiating with the Dentist
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1. What principle of economics is
illustrated in this video?
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