1. Suppose the American Association of University Professors (AAUP) successfully coordinated and lobbied congress to pass a requirement that all professors at U.S. universities must have graduate degrees from U.S. universities.
a. How would this requirement affect the market for 4-year college degrees in the U.S.? Graph and explain your answer. What would happen to tuition and the number of degrees conferred?
b. How would this requirement affect the market for graduate degrees at universities outside the U.S.? Again, graph your answer and explain what would happen to both tuition and the number of degrees conferred.
c. Suppose that the requirement were instead that all professors at U.S. universities had to be U.S. citizens, but there was no requirement that professors’ graduate degrees be conferred by U.S. universities. How would this policy change your answers to Parts a and b?
2. Medical Doctors earn much higher salaries in the U.S. than in most of the world. Salaries vary widely by specialty and region, but the average for all physicians is roughly $200,000 per year.
Explain why, in 3-4 paragraphs. You may give more than one reason, but use the labor market for doctors’ services to explain your answer. A graph is not required, but it can clarify your thinking.
3. Using consumer behavior theory, i.e. utility-maximization theory, to explain how international trade makes consumers better off in terms of individual utility. Who is harmed by international trade? Explain how, using the tools of microeconomics. Your answer should be 3-4 paragraphs long and should include supply and demand graphs where appropriate.
4. Some macroeconomists believe that Long-Run Aggregate Supply (LRAS) is perfectly inelastic.
a. Explain why they would believe so in 3-4 sentences.
b. If LRAS is perfectly inelastic, what are the implications for monetary policy? Explain in 2-3 sentences.
c. If LRAS is perfectly inelastic, what are the implications for countries considering fixed exchange rates?
5. On foreign aid to developing countries:
a. What are the circumstances under which foreign aid can help a developing country? Explain your answer in 3-4 sentences.
b. How can foreign aid harm a developing country? Explain in 3-4 sentences.
c. What are the problems with sending money as foreign aid? Explain in 2-3 sentences.
d. What are the problems with sending goods as foreign aid? Explain in 2-3 sentences
6. On international economic development:
a. What do you believe is the key to international economic development, i.e. what is the root cause of sustainable economic growth in poor countries? (2-3 sentences)
b. What do you believe are the necessary conditions for growth, i.e. what conditions MUST already exist for growth to occur? (2-3 sentences)
c. How can the U.S. government best promote economic growth in the developing world? (3-4 sentences)