Principles of Economics

Problem Set 8
Spring 2015
Capital and Labour Markets
This problem set will be marked on attendance (5 points) and participation (5 points) in the next
seminar session. The seminar will be structured as a debate between teams. Each student will be
randomly allocated to a team, and teams will then be arguing For or Against one of the
possible motions listed below. For an example of how this will run, please have a look at
intelligence2 debates podcasts - http://www.intelligencesquared.com/podcast/.
You are expected to come to the seminar session ready to engage in discussion and debate
surrounding these issues drawing on material from the lecture and chapters relevant to the issue.
In preparation, I suggest making some notes on what your strongest arguments would be in favor
and against these statements based on the readings and lecture.
1. The United Kingdom should abolish patent protections.
For:
1. Promoting innovation
a. grant of limited monopolies, as a reward to inventors for the time, effort and
ingenuity invested in creating new products and processes
b. potential for financial returns adds an incentive to the traditional rewards of
scientific innovation, such as academic recognition and promotion within
research institutions (to investors)
c. Give your product credibility
d. may discourage some researchers from embarking on a course of research
that is already being pursued elsewhere, despite the possibility that they may
do better or more efficient work.
e. Patents may also inhibit research by discouraging knowledge sharing prior to
filing for patent protection. The results of new research may be withheld until
an inventor is in a position to apply for a patent and the invention is
sufficiently well developed to ensure that the patent will be granted.
f. Takes time and money to establish a patent. All patents have to be
researched to ensure there are no existing patents of a similar nature
involves legal fees
1. it creates more competition
For:
1. prevents the creation of monopoly. Reduce innovation because firms would have no
incentive to further develop their good. Less sharing of knowledge and less development.
2. It will eventually lead to market failure because of the positive externalities. Example:
medicine.

3. Money and time to establish another project or research because of how much it cost to
establish a patent
4. Large firms can
5. Its easier to patent and then continue patent another one so it create sa huge inequality in
the market.
6. Monopoly firms can increase the price above the equilibrium price.
Questions:
1. How can you justify the patents if it leads to medicine higher costs be afforded by 3rd
world countries?
2. Who decides the length of the patents?
3. How can companies sue each other if there are no patent laws?
4.
2. Employment protection laws are good for workers.
a. Race, sex, age or disability discrimination is illegal. Businesses
must be careful to treat all workers fairly. They must offer equal pay and
promotion opportunities for women and ethnic minorities.
b. Workers are guaranteed a minimum hourly wage rate of 5.80 per
hour in 2009.
c. Parents are entitled to paid leave from work soon after their
children are born. The firms must keep their post open for when they
return from maternity or paternity leave.
d. limit on the number of hours staff can work in a week.
e. Health and safety procedures are put in place to prevent staff from
being harmed or becoming ill due to work.
f. it's build the relationship between the employee and

employer
g. Protecting workers rights increases the costs of firms. Eg. Redundant workers
receive compensation according to the number of years with the firm.
h. Sometimes they are unreasonable and reduces efficiency through multiple
strikes etc.
i. Creates unemployment
3. Attending university is a wise investment.
a. Would financial returns (return on investment) exceed the capital investment?
b. unemployment rates for graduates are far below average.
c.

economics, boils down to supply and demand

4. Poor countries need more capital.

a. Corruption (theres a hole in the capital storage)
b. It doesnt matter how much capital there is but what you do with the capital.
c. Capitaly to invest in Investing in education, health, andsocial protection not only
pays off for individuals whose lives are improved,
d. Infrastructure and technology transfer

Increased Productive efficiency due to competition from multinational

subsidiaries
f. Employment
g. Increase in Savings and Investment
e.