All questions are based on the module resources.  If the homework includes more than 6 questions, then chose and answer any 6 questions under the module .  For best results, give your best full answer, mention your readings, use numbers and examples. 

Homework 1.                            

1.  Using Pew Research site,  describe with numbers 5 recent social or demographic trends related to marriage, divorce, children or family composition.  What, in your opinion, explains each of these trends?

2.  Using the Occupational Handbook, find out what occupations are projected to grow the most in the next 10 years and which jobs are projected to decline.  What, in your view, explain these trends?

3.  Explain what is meant by household production.  How much is it worth?  

4. Read the article by Lundberg ” The American Family and Family Economics’.  What trends does the author describe?  Explain each briefly. 


Homework 2.                    

1. Explain the opportunity cost of the following decisions:

  • a.  Kate takes a part-time job and the sacrifice of study time causes her grade point average to fall from 4.0 to 3.0.  What is the opportunity cost of the job?
  • b. You take a year off work in order to take care of a sick family member.
  • c. A lawyer who earns $80/hour takes 2 hours off to attend a free lunch.
  • d. You pay $50 for a pair of fancy jeans.

2. Consider a decision by a couple whether to have a child (or one more child) or not

  • a. List all costs of having a child, including opportunity costs.
  • b. List the expected benefits of a child.
  • c. If mom earns more than dad, who has lower opportunity cost of taking time off work to take care of a child? Explain the tradeoff involved in this decision.
  • d. Using your list of benefits and costs, explain why people in poor countries choose to have more children than people in wealthy countries.

3. The central assumption of economic theory is that humans are rational.  Rational people make choices by comparing costs and benefits of various alternatives and selecting the one with the highest net benefits. Give one example of a rational cost-benefit decision you have made recently. Describe your costs and benefits, and how you compared the two. Are you a rational person?

4 . Suppose Clara can  either make 12 pizzas or 4 cakes per day, while Karl can make either 5 pizzas or 10 cakes per day. Who has comparative advantage in pizza, and who in cakes?  What are their opportunity costs of making one pizza? How can this couple gain by living together compared to living apart? Graph the two PPFs.

5.  Some people believe that women have a comparative advantage in housework whereas men have a comparative advantage in work for pay. Why do people think so? Use the concept of comparative advantage to explain why spouses should or should not divide chores equally. Explain pros and cons of specialization for both spouses – who gains, who loses, and how?

6. Read the ‘Quiet revolution…’ article by Goldin. Explain what kind of revolution took place and how it transformed women’s employment, education, family.  Did it also affect men?


Homework 3               

For the next 3 problems, draw supply and demand curves in the labor market for math teachers.  Suppose that the market for math teachers is in equilibrium with current wage rate $30/hour and 1,000 teaching hours are demanded/supplied at this rate. Mark equilibrium wage (PRICE of labor) and work hours (QUANTITY of labor), label your graph.  Predict how the following event affects P and Q in the market for teachers (increase, decrease, or no change). Show the corresponding shift on your graph.  Mark the new equilibrium.

2.  More high school students choose to take math.

3.  Math become less popular among high school students.

4.  There is an increase in the number of college graduates qualified to teach math.

5. Explain how wages are determined. What role is played by marginal product of labor? Why are wages different in different countries?

6.  Which of the following is the BEST explanation of why some sports players earn astronomical wages? Explain your answer.

  • a. Their physical abilities
  • b. Their ability to attract a large audience
  • c. The prestige of athletes, which appears to be higher than that of other occupations, such as teachers.
  • d. The theory of labor markets cannot explain why some workers earn disproportionate wages

7. Explain pros and cons of raising minimum wage to $15/hours.  Who would be affected, according to characteristics of min wage workers?  What kind of ripply effect would this policy create in the economy?


Homework 4              

1. Explain the tradeoff between fun and wage.

2.  The theory of compensating wage differentials predicts that workers in “dangerous jobs” should be paid more than workers in “safe jobs,” everything else equal.  However, if we look at data, we find that workers in risky jobs (farm workers, construction workers, etc.) actually earn less than workers in safe jobs (professionals, service providers, etc.) who work in more desirable work environment.  What is the most likely explanation among the following?  Explain why you chose a particular answer.

  • a. employers have imperfect information and don’t select jobs wisely
  • b. highly paid and poorly paid workers are in noncompeting groups
  • c. firms with desirable working conditions are not hiring low skill labor
  • d. the differential required to compensate for high skill exceeds the differential required for poor working conditions

3. Define “gender pay gap” , explain how it is computed and  how big this gap is at present.  What explains this gap?

4. Why do the gender gap numbers ‘lie’?  If you were in the government, what policies would you recommend in order to reduce the gender gap?  Explain.

5.  “Occupational segregation no longer exists”. Argue with this statement using examples and numbers. Is this segregation a bad thing?  Should the society design policies to eliminate it? If so, suggest a policy.

6. Give several reasons why your classmate’s wage may be different from your wage. Explain each briefly.

7. Why did Henry Ford pay higher than market wages to his factory workers, and how could his business still be profitable?

8.  Why do some workers belong to unions?   Do unions raise wages?


Homework 5                

1.  Explain the term ‘statistical discrimination’.  Provide an explanation other than discrimination that could account for the following group differences.  (You do not need to agree with your explanation; just try to make it plausible).

  • a. Married men without children earn more than single men
  • b. People with criminal records earn less than other people with identical education and intelligence.
  • c. Japanese-Americans earn more than other Americans.
  • d. Teachers earn less than equally-educated bankers.

2. Suppose an employer offers a base wage of $20 per hour for the first 40 hours each week and overtime pay of $30 per hour for any hours beyond 40.  Suppose A chooses to work 36 hours and B chooses to work 42 hours. Compute weekly earnings of employees A and B.  Compute earnings gap in percentage terms between them.  Does this gap constitute discrimination?

3 . In the land of Chin there are two distinct and equally numerous peoples: Yins and Yans. The Yang have historically been stronger and more aggressive that the Yins. Both the Yins and Yans play paddle tennis, but paddle tennis tournaments have always been segregated by group because of the physical advantages of the Yans. The Yin do not object to paddle tennis tournaments being segregated, but recently have been upset about the fact that the top Yin players receive less than the top Yan players. You have been hired by the Chin Paddle Tennis Association (CPTA) to access the market for paddle tennis players. CPTA have asked you a few questions given below.

  • What is the most likely source of the wage differential between the Yin and Yan paddle tennis players?
  • Is this discrimination as economists define the term?
  • Is the wage differential likely to persist over time, or how do conditions in Chin have to change in order for the differential to disappear?

4. Does labor market discrimination exist? Give examples.  Explain how competition and profit motive can reduce or completely remove discrimination of workers by gender or race?

5.  Describe some of the recent findings of the impact of a person’s name, or sexual orientation, or appearance on his/her earnings.

6.  Women who own their own businesses earn net profits that are only half as large as the net profits earned by men.  How can this be explained?

7.  (based on Slate article) Suppose you’re the manager of a corporation that employs one black and nine whites, paying the black $60,000 and the whites $100,000 apiece. On top of wages to workers, you pay shareholders dividends in the amount of one-half of the total wage payout amount. You notice that you could increase the value of your company by firing your nine $100,000 white employees and replacing them with $60,000 blacks. So next year you do exactly that. The shareholders still receive on-half of the wage payout plus any difference between this year and last year payouts. Calculate the company’s total wage payouts and payments to shareholders last year and this year. How much better off are your shareholders in the year when you don’t practice discrimination compared to the year when you do?


Homework 6      

1. Based on all the readings from this module, make a detailed lists of benefits and costs of marriage. Explain each briefly.

2. Review your list of gains from marriage above, and think of the following:

  • Do co-habiting couples enjoy the same gains as married couples?
  • Do same sex couples enjoy the same set of gains from legal marriage as opposite sex couples?
  • Are gains distributed evenly among men and women, or does marriage benefit husbands /wives more?

3. Despite its benefits, marriage rates declined in the last 50 years. What are some explanations for this trend?

4.  Explain how marriage can be compared to a business in terms of negotiation costs, allocation of resources, investments, inputs- outputs, prices in competitive market, and bargaining.

5.  Read Friedman’s chapter on ‘Family’ from the book ‘Law’s Order’. What have you learned about the economics of the family?

6. How do economists explain marriage wage premium for men?

7.   Comment on one of the online readings under this lesson.   Outline the author’s main points, explain what you found interesting about this article.


Homework 7      

1. Explain why economists say that accumulation of human capital a type of investment. Include the definition of human capital.

2. What are some of the monetary and non-monetary returns to a college degree?  Is personal spending on education always a good investment?

3. Is education signaling or skill building? Explain both views and take a side.

4. Explain how college education is a public good.  What kind of ‘external effects’ does it have apart from its benefits to the student who graduates with a degree?  What might be the economic rationale for government subsidies for college educations?

5.  The left column on the Occupation Handbook website shows occupation groups where you can click on a group and find descriptions of a dozen of jobs within each group with different wages.  Give examples of high earning occupations, and examples of occupational groups with very different salaries within groups.   How would you explain these wage differentials?

6.  Explain 3 types of unemployment and give examples of each.  Find current official unemployment rate in the US.  Comment on why and how unemployment rates may be different for groups of people by gender, race, education, age or by state.

7. What are some of the explanations for declining labor force participation among men?

8.  You are thinking about going to graduate school. It costs $3,000 a year for tuition and books. Room and board is $5,000 a year. If you complete four years of graduate school, your yearly earnings will be $60,000 as a professor and your salary will increase at a rate of 10% per annum. If you chose not to go to grad school, your yearly earnings will be $45,000 as a manager and your salary will increase at a rate of 5% per annum. The annual interest rate is 5%, and your working life is 20 years (note: you work only 16 years if you go to graduate school).

  • Write down the detailed formulas you would use to calculate the net present discounted values of your earnings in the two proposed occupations.
  • Calculate the net PV in Excel or using a calculator. Which occupation should you choose to maximize wealth?
  • What other considerations, besides yearly earnings, might enter into your occupational choice?


Homework 8                

1.  Are poor getting poorer and rich getting richer? Describe current trends in income inequality in the US over the last few decades. Where does the US stand compare to other countries?

2. What factors have contributed to this trend? Explain each briefly.

3. What are some of the harmful effects of rising inequality for a society? Is income inequality unavoidable in a capitalist economy?

4.  Would you or would you not have any reasons to complain if you learned that your child is dating a person from a lower socio-economic status? Provide your economic rationale.

5. The federal minimum wage is now $7.25 an hour. How much would a worker earning this minimum wage make in a year, assuming he or she worked 40 hours a week, 50 weeks a year?  How does this compare to the poverty line for a family of three persons?

6.  How is poverty threshold determined? What percentage of U.S. households are officially in poverty? What demographic groups – by race, age, type of household- are at the highest risk of poverty?

7.  Listen to one of the TED talks under this module (or find a more recent talk on inequality on ted.com site), describe its main ideas and share your opinion.

8. Based on your readings from this module, make up your own question and answer it fully.

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