Application 2

Application 2 - 4 Are these inputs substitutes or...

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ECONOMICS 201 SPRING 2012 APPLICATION 2 Please type your responses. We will have a class discussion on Friday March 23, 2012. Al Qaeda Let’s consider Al Qaeda and other terrorist organizations as competitive profit maximizing firms. In this context, we may define “profit” broadly as the net benefits of production. 1. Presumably, what is Al Qaeda’s profit? That is, what is it trying to maximize? 2. What is Al Qaeda’s output? What sort of “goods” does it produce? 3. What are the factors of production or inputs that Al Qaeda uses to produce its output?
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Unformatted text preview: 4. Are these inputs substitutes or complements in the production function? Explain. 5. What is included in the price or cost of these inputs? 6. What happens to input usage when the economy in the Middle East improves and wages rise? 7. What happens to output when it becomes less costly to obtain plutonium? 8. What happens to output when the US allocates massive resources to airport security? 9. Do you think that Al Qaeda has market power in input markets? Does it take prices as given? Explain....
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