quiz8micro - on the individual behavior of US companies? In...

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Quiz 8 Fall 2009 Quiz 8: #11.1, 11.4, and the question below. Zamen is a small country located in the midst of the Atlantic Ocean. It is completely isolated: no one goes there, no one leaves. One half of Zamen’s working age population is unemployed. President Obama decides to give Zamen a billion dollars for the purpose of creating a labor intensive sweater manufacturing industry. It is agreed that Zamen will export 10 million sweaters a year to the US, which is 10 percent of the US market. Zamen’s productio n will always stay fixed at exactly 10 million sweaters. a. What are the short- run effects of Zamen’s’s sweater export
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Unformatted text preview: on the individual behavior of US companies? In short-run equilibrium, what is the change in US aggregate supply? How much of the short-run aggregate supply is provided by Zamen? b. What are the long-run effects of Zamen’s sweater export on equilibrium price, firm output, the number of US firms in the sweater industry and on the final share of the US sweater market that is domestically supplied? c. Zamen was hoping that the US sweater industry exhibited decreasing costs, rather than constant costs. Show why this would have benefited Zamen in the long-run....
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This note was uploaded on 04/26/2010 for the course ECO 420K taught by Professor D during the Spring '10 term at University of Texas.

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