ECN 1500 Online, Summer 2022 Problem Set #1 Bowles
Note 1: Not all questions will be graded but complete each question as if it will be graded.
Note 2: Please complete this assignment with Word (you can draw in graphs with a pen if necessary). Then
convert to a pdf and submit as a pdf file through Canvas.
1. More on Jared Diamond’s “Geography Theory” of Western (American) Institutions.
Got to https://www.pbs.org/gunsgermssteel/variables/cattle.html
And then to https://www.pbs.org/gunsgermssteel/variables/smallpox.html
A) Please explain how Bos Taurus (cattle) and smallpox help explain why English is spoken in Preston,
Idaho and the language of the Shoshoni Indians is not spoken in Preston, England.
B) The English had cattle and, by the 16
th
century, universities and guns. The Shoshoni had Buffalo
(Bison) but neither universities nor guns. Does the difference between Cattle and Buffalo help
explain universities and guns in England but not in the Cache Valley at the time European settlers
started to make their way into Cache Valley in the 18
th
century?
C) Constitutional government (i.e., the Rule of Law) as opposed to the Rule of the Powerful is a critical
institution that supports thriving societies, including a high standard of living. Visit:
https://data.worldbank.org/indicator/NY.ADJ.NNTY.PC.CD?name_desc=false
What is the Net National Income per Capita in the U.S.? Russian Federation?
What explains this difference?
2. More on one of the articles you read for Discussion 1, “Who Gets to Decide the Truth.”
A) The article notes Adam Smith’s “most famous insight [was that] a well structured social order can
harness those very traits to promote activity which benefits ourselves by benefitting other.” (See p. 2
of 7) What are those traits? What do we call this insight of Adam Smith?
B) What did John Locke mean by Natural Rights? In what way does Locke’s notion of Natural Rights
complement Adam Smith’s idea of the Invisible Hand Principle?
3. If the market system is allowed to determine the annual number of houses built in the U.S., will Adam
Smith’s Invisible Hand result in the correct number of homes built? Explain why or why not.
4. If the market system is allowed to determine how houses are built in the U.S., will Adam Smith’s Invisible
Hand result in homes being built efficiently? Explain why or why not.
5. If the market system is allowed to determine who gets the new houses, will Adam Smith’s Invisible Hand
result in the “correct” people moving into a new home each year? Explain why or why not.
6. How would an economist explain the following: A freshman basketball player at Duke University is less
likely than a freshman basketball player at USU to stay in college for four years.
7. Using economic concepts, what explains the following, particularly the differences between the player and
coach salaries:
College Football coach and player salaries 2021/22 season:
Nick Saban (Google Nick Sabin): $9.5 million
Bryce Young (Google Bryce Young) $0.0 million
NFL coach and player salaries 2021/22 season:
Bruce Arians (Google Bruce Arians) $8.0 million
Tom Brady (do you really have to Google Tom?) $25.0 million
8. In the context of the Delta variant of Covid (Assume that the vaccines were reasonably effective in
preventing the infections from the Delta variant):
A) Was there an external benefit associated with getting vaccinated? Explain.
B) Assuming there was an external benefit associated with the Delta variant, what would be an
economic justification for the government to mandate vaccinations?
9. In the context of the Omicron variant of Covid (Assume that the vaccines were much less effective in
preventing the infections from the Omicron variant):,
A) Is the economic argument in favor of government vaccine mandates weaker with Omicron as opposed
to Delta? Explain
B) Will the economic decision rule produce socially desirable outcomes when there are externalities –
see pages 65-66 in text? (Another way of asking the same question: Does the Invisible Hand
Theorem hold as true when there are externalities – see top of page 15 in text?)
10. A) Briefly explain why Idaho exports potatoes to Florida and imports oranges from Florida.?
B) Can Idaho and Florida, through specialization and trade, jointly produce and consume more of both
goods? Why?
11. Draw a PPC and clearly label:
A) A possible but inefficient point.
B) An unattainable point.
C) An attainable and efficient point.
D) What would make the unattainable point attainable in the future?
12. Draw a PPC that illustrates (A) increasing marginal opportunity costs, (B) constant marginal opportunity
costs and C) decreasing marginal opportunity costs.
13. What is there about the real world that results in trade and specialization?
14. A) Explain why labor productivity is higher in the Nogalis, AZ compared to Nogalis, Mexico?
B) Why are wages higher in the Nogalis, AZ compared to Nogalis, Mexico?
15. What would likely occur in Nogalis, AZ compared to Nogalis, Mexico regarding relative wages if the two
became institutionally similar? Why?
16. Note three characteristics of each: Feudalism, Mercantilism, and Market system?
17. In what century did average output/income begin to rise rapidly in Europe? Why?
18. Could it be argued that Adam Smith’s book, The Wealth of Nations, and the U.S. Constitution sprang from
the same intellectual/philosophical framework? Explain.
19. A) List three causes of market failure.
B) What is meant by the term market failure?
20. In a market economy, why don’t we typically see shortages and surpluses?
21. Consider the Apple iPhone 13 market in the U.S. Using a separate supply and demand diagram for each,
show the effects of the following:
A) An Omicron related decreases in employment and incomes, assuming iPhone 13’s are a normal good.
B) a shortage induced increase in the price of the computer chips that power the iPhone 13.
C) An decrease in the price of the Galaxy S21, a substitute good to the iPhone 13.
22. A) With reference to the Circular Flow Model, explain what information comes out of the Factor Market and
what role that information plays in answering the questions of how to produce and for whom to produce.
B) With reference to the Circular Flow Model, explain what information comes out of the Goods Market and
what role that information plays in answering the question of what to produce.
23. A) List three sources of market failure.
B) What is meant by the term market failure.
C) List four functions of government for which there is the most clear economic justification.
