Economics Questions & Answers

Q1:
In the article “Trump’s Tariffs Will Hurt America’s Automobile Industry, Including Workers
Who Build Cars,” the author offers an assessment of the impact of the proposed tariffs on steel
imports on selected brands in the automobile (Toyota) and motorcycle (Harley-Davidson)
industries. Based on this article, use graphs and economic intuition to analyze the impact of the
proposed tariffs on the following markets: Steel, Steel workers, Toyota automobiles, Toyota
automobile workers, Harley-Davidson motorcycles, and Harley-Davidson motorcycle workers. For
each of these markets, you will provide a graph and a brief economic argument. Your graphs must
include the surpluses of the market participants before and after the tariffs (and possible
retaliation), a conclusion on who is worse off and who is better off, and a deadweight loss. Assume
for simplicity that all of these markets are competitive, not monopolistic. Graphs are required,
and I recommend you draw each industry and its workers side to side (Steel and steel workers;
Toyota and Toyota workers; and Harley and Harley workers). This will make a total of six graphs.
Limit is two pages. (Please label the axes of any graphs you draw).
Q2:
In the articles “New Push Ties Cost of Drugs to How Well they Work,” by Loftus, and “Pay-ForPerformance is No Miracle Cure,” by Pauly; the authors make an argument that tying the price of
a drug to its effectiveness is a form of price discrimination. (a) Does this practice meet the
conditions needed for price discrimination? Why or why not? Please address all conditions one
by one. (b) Pauly concludes that it is highly unlikely that consumers will be better-off as a group if
monopolistic pharmaceutical companies practice discriminatory pricing. Analyze this
claim using graphs (required) and economic intuition. Limit is two pages and graphs are required.
(Please label the axes of any graphs you draw).
Q3:
Chelsea owns the only parking garage in town (i.e., she’s a monopolist). Suppose that the marginal
cost of letting an additional car in the garage is zero, and that the demand for parking in the garage
is known. (a) Show how Chelsea determines how many cars she will allow in the garage and how
much she will charge each car to maximize her profits. (b) Are profit maximization and revenue
maximization equivalent in this case? Why or why not? (c) Is it always profitable for Chelsea to fill
the garage to capacity? Why or why not? Assume that Chelsea does not practice price
discrimination. Limit is one page This question and at least one graph. (Please label the axes of
any graphs you draw).