Seo Hee (Janet) Hong Professor Kinnaman ECON 103, Fall, 2009 09/16/09 Homework #2 1] The film "Free

Trade Slaves" documents the present living and working conditions in the free trade
zones of several countries. What will the future be like in these areas?

a) Adam Smiths theory argues producers will have more accumulation to purchase capital and improve their tools by paying low wages. The increase of capital results in more demanded labor, thus producers will have to raise wages in order to obtain workers from competition with other companies. Workers will enjoy well beings as their wages reach the maximum, and population will rise. The wages will eventually be regulated. b) According to Thomas Malthus , the growth in population will begin immediately with the first rise of wages. More factories and jobs will appear, but the natural resources will not be sufficient at this point. Population would eventually overwhelm the countrys ability to sustain, and wages will become lower due to excessive labor. c) Karl Marx believes in Law of Accumulation. Producers will reduce the main source of profit by replacing labor with capital. Wages get lower as a result of less demand for labor. The system then meets a recession where small businesses fail, and their capital along with labor is acquired by remaining firms at low value. These firms will boom on the basis of labor and capital, enabling the next cycle to start. d) Production is not associated with distribution by any means according to John Stuart Mill. Producers do not determine wages, but society determines the shape of distribution. The most desirable distribution of wealth will be formed by community.

2] 3) 4 hrs paint a room; 3 hrs- sand a floor One worker will paint 6 rooms if all 24 hours were spent painting. 1.5 painted rooms would have to be given up if 2 floors were sanded. (6rooms-18hours/4hours)

4) A second worker becomes available:

5) c. The cost of building one convenience per week is building 3 homeless shelters. More resources are demanded for a convenience store than a homeless shelter, therefore the cost of building convenience stores are larger than that of building homeless shelters. d. Both outputs cant be more produced because the available resources are limited. e. The most desired point is the one that production satisfies consumers demand for certain product by allocating more resources on it. a+b.

3]

a.

b. In 1 hour of labor, the opportunity cost of catching 2 fish is giving up 6 yams. I will allocate more labor to digging yams

c. I can purchase 8 yams with the same amount of labor time when we dig 6 yams. Therefore, I will profit more by allocating labor time to catch fish and exchange for yams at cheaper price.