Read the article from The Economist magazine, “The great trailblazer” from the May 10 print edition. Summarize the article in your own words.
Depict Becker’s insights about discrimination using the production possibilities frontier model as follows.
Define and sketch the model, include a thorough explanation of its assumptions. Label the axes with two representative goods.
Include a representative point in the model that illustrates production in the event of discrimination. Explain thoroughly, connecting the simplified depiction in the model with the insights from Becker’s work described in the article.
3. Suppose you earn $14 an hour and every day you go to lunch at your favorite restaurant, Café Excel, where you spend 30 minutes in transit and waiting for a table, then spend 30 minutes eating and pay $16 for lunch. Suppose further you get a raise to $20 an hour and simultaneously Café Excel has a special allowing you to pay only $12 for lunch. What is the difference in the full price of lunch after your raise? Explain thoroughly.
4. When the price of a top-of-the-line luxury sedan was $85,000 there were 6,184 sold. Several years later when the price was $116,000, although the cars were basically unchanged, there were 9,462 sold. Does this mean that the demand for these sedans slopes upward to the right (i.e., that it is positively sloped in two-dimensional space)? Carefully explain.