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Macroeconomics Unit 3 Homework Answers Chapter 3 5. Suppose that the supply schedule of Maine lobsters is as follows: Suppose that Maine lobsters can be sold only in the United States. The U.S. demand schedule for Maine lobsters is as follows: a. Draw the demand curve and the supply curve for Maine lobsters. What is the equilibrium price and quantity of lobsters? Now suppose that Maine lobsters can be sold in France. The French demand schedule for Maine lobsters is as follows: b. What is the demand schedule for Maine lobsters now that French consumers can also buy them? Draw a supply and demand diagram that illustrates the new equilibrium price and quantity of lobsters. What will happen to the price at which fishermen can sell lobster? What will happen to the price paid by U.S. consumers? What will happen to the quantity consumed by U.S. consumers? 5. a. The equilibrium price of lobster is $15 per pound and the equilibrium quantity is 600 pounds, point E in the accompanying diagram. b. The new demand schedule is obtained by adding together, at any given price, the quantity demanded by American consumers and the quantity demanded by French consumers, as shown in the following table. The new equilibrium price of lobster is $20 per pound and the new equilibrium quantity is 700 pounds, point E in the accompanying diagram. The opportunity to sell to French consumers makes Maine fishermen better off: they sell more lobster and at a higher price than before. U.S. consumers, however, are made worse off: they must pay a higher price for lobster ($20 versus $15 per pound), and as a result consume less lobster (400 versus 600 pounds). 14. The small town of Middling experiences a sudden doubling of the birth rate. After three years, the birth rate returns to normal. Use a diagram to illustrate the effect of these events on the following. a. The market for an hour of babysitting services in Middling today b. The market for an hour of babysitting services 14 years into the future, after the birth rate has returned to normal, by which time children born today are old enough to work as babysitters... View Full Document

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