Homework Assignment #2 Chapters 6-10 ECON 321B

This homework assignment must be turned in before you will be authorized to take your first unit
exam for Part II of the course.
Please note that this assignment requires several full essay answers, not just truncated or singlesentence answers. Some of these questions require you to think and bring together various
models, concepts, evidence, and ideas from the textbook. By taking the time to think out these
questions, you will gain a deeper understanding of the material covered in the textbook and the
lectures.
1. In Chapter 6, the textbook offers a simple definition of economic growth: A sustained
improvement in average per capita welfare, brought about by an increase in the economys stock
of productive resources or by an improvement in the way the economy transforms resources into
welfare-enhancing output. Briefly discuss the pros and cons of this definition and possible
alternative measures of economic growth.
2. Table 6.2 illustrates a case where the combinatorial process starts with three ideas and
generates a constant amount of new innovations each subsequent period. Table 6.1 shows a more
explosive process under the assumption that there are initially four ideas. What about the case in
which we start with two ideas? Show and explain what happens in this case.
3. In light of the hypothesized dynamic effects of international trade on economic growth, is it
correct to conclude that static models of international trade are irrelevant, or nearly so, for
calculating the costs and benefits of international trade? Discuss.
4. Compare how an orthodox economist measures human welfare and how happiness studies and
supporting evidence from neuroscience and behavioral experiments would measure human
welfare. Then suggest how the different perspectives of orthodox economists and behavioral
economists would influence the policies that each would recommend for improving human
welfare.
5. How has international trade affected a countrys ability to provide the economic rights listed in
either the Universal Declaration of Human Rights or Roosevelts 1944 State of the Union
address?
6. Begin with the free trade case depicted in Example 8.5 in Chapter 8. Suppose that, instead of
a specific tariff of $3.00 per calculator, Homeland imposes a $2.00 specific tariff. What
difference does the reduction in the tariff make to the net welfare effects in Homeland and
Abroad?
7. Use a partial equilibrium model to explain the costs and benefits of an auction quota. Also,
suggest some reasons why they are seldom, if ever, used when countries impose import
restrictions.

8. Explain clearly how the political economy models discussed in the previous chapter help to
explain why the Eisenhower administration, despite its stated goal of liberalizing world trade,
insisted that Japan set a VER on textiles and clothing products.
9. Describe mercantilism and why it grew as a global system of commerce and trade. How was
it related to Colonialism?
10. Explain fast-track authority. Why did the president of the United States ask the U.S.
Congress for fast-track authority?