APPLIED LEARNING ASSIGNMENT #2

1. Define the term market failure.

2. Define what is an externality and how it relates to market failure.

3. Provide few (at least 3) examples of positive and negative externalities and explain why they are externalities.

4. Consider some of the issues related to Covid-19 pandemic. Provide at least one example of people’s behavior that could be classified as a positive externality and one as a negative externality. Explain your answer and provide some evidence, such a links to newspaper articles.

5. What are rival or rivalrous goods? Provide 3 examples and explain/justify your answer.

6. What are non-rival or non-rivalrous goods? Provide 3 examples and explain/justify your answer.

7. What are excludable goods? Provide 3 examples and explain/justify your answer.

8. What are non-excludable goods? Provide 3 examples and explain/justify your answer.

9. Define private goods? In your definition make sure that you use rive/nonrival and excludable/non-excludable terms. Provide 3 examples and explain/justify your answer.

10. Define public goods? In your definition make sure that you use rive/nonrival and excludable/non-excludable terms. In addition, how are public goods related to market failure? Provide 3 examples and explain/justify your answer.

11. What is a free rider?

12. Define common goods? In your definition make sure that you use rival/nonrival and excludable/non-excludable terms. In addition, how are common goods related to market failure? Provide 3 examples and explain/justify your answer.

13. What is meant by “the tragedy of the commons”?

14. What are club goods? In your definition make sure that you use rive/nonrival and excludable/non-excludable terms. In addition, how are club goods related to market failure? Provide 3 examples and explain/justify your answer.

15. Put the terms 1) private goods, 2) public goods, 3) common goods, and 4) club goods into the following table:

Connection to COVID19

Now focus on COVID 19 pandemic.

16. In the context of this pandemic, provide an example to explain the concept of a private good. What should the government roll be in this case? What public policy do you recommend, if any? Explain your answer and provide links to the related material.

17. In the context of this pandemic, provide an example to explain the concept of a public good. What should the government roll be in this case? What public policy do you recommend, if any? Explain your answer and provide links to the related material.

​18. In the context of this pandemic, provide an example to explain the concept of a free rider. What should the government roll be in this case? What public policy do you recommend, if any? Explain your answer and provide links to the related material.

​19. In the context of this pandemic, provide an example to explain the concept of a tragedy of the commons. What should the government roll be in this case? What public policy do you recommend, if any? Explain your answer and provide links to the related material.

Few Interesting Economics Research Articles Related to COVID-19 pandemic

20. Read the working paper The Impact of COVID-19 on Gender Equality by Titan M. Alon, Matthias Doepke, Jane Olmstead-Rumsey, Michèle Tertilt.

​What do they say about gender equality as result of the shelter-in-place, shutdowns, or lockdowns orders? 200 word summary

21. Read the working paper (introduction and conclusion will suffice – the rest of the paper might be a bit too technical) Health versus Wealth: On the Distributional Effects of Controlling a Pandemic by Andrew Glover, Jonathan Heathcote, Dirk Krueger, Jose-Victor Rios-Rull.

What are some of the “distributional implications” mentioned in this paper as a result of the “lock-down” policies? 200 word summary

Cost-Benefit Analysis

22. Provide some estimates and evidence of how much will our economy shrink as a result of the shelter-in-place, shutdowns, or lockdowns orders. In other words, how much will GDP shrink as a result of this shutdown?

23. Can you think of any other side effects, negative consequences of this lockdown – besides the decrease in the GDP? Provide evidence for your answers. Here as some suggestions about the topics you could include:

• Lock-downs, Loneliness and Life Satisfaction, Daniel S. Hamermesh, NBER Working Paper No. 27018, Issued in April 2020

• ​​Unemployment and Health Insurance

• The Mental Health Effects of Coronavirus Are a “Slow-Motion Disaster”

• ​How coronavirus could impact futures of students entering high school, college​​

• Domestic violence incidents rise amid COVID-19 stay-at-home orders

24.How does our society value human life? What methods do economists use to estimate the value human life? What is the statistical value of a single life in the US?

​25. Provide some estimates and evidence about the number of lives saved as a result of the lockdown? How can one determine how many lives will be saved?

Policy Analysis

26. What is a paycheck protection program that was just passed in response to the COVID19 pandemic recession? What are some issues with it?

27. What is US Corona Virus Stimulus package? Can you explain who gets what, and how much, according to this stimulus.

28. Given your analysis above, do you believe that the policies implemented both by the Federal and State governments make sense. Why/ why not?

​29. Can you come up with a different and possibly better approach for handling this pandemic? Be as precise as possible and provide data and evidence for your argument.

APPLIED LEARNING ASSIGNMENT #2

Market Failure - Occurs when there is an inefficient allocation of resources that causes net loss to economic value. Ex: MC>MB

Externality is when market exchanges have an effect on those who are outside, or third parties beyond those involved. It relates to market failure in the respect that there are negative and positive externalities often referred to as spillovers.

The following are three examples of positive externalities, when the consumption or production of a good causes a benefit to a third party: Consuming private education is great for personal consumption, but has a positive effect on society in that you may contribute to others' consumption. Walking to work will result in less pollution in the air making the air cleaner for society. A farmer growing excess apple trees is beneficial to beekeepers because it provides more efficient source of nectar to help make honey.

The following are three examples of negative externalities, a cost that is suffered by a third party as a consequence of an economic transaction: If you dislike country music, you would hate to hear it blaring down your local road from someone's car stereo. Traffic is a result of road space taken up by each car causing less mobility on the road for all drivers.

In the window below you will find negative externalities taking place during the coronavirus pandemic. Public environments create challenges towards stopping the spread of the virus. One of those challenges is one of the symptoms themselves, coughing without properly covering up, can spread to the food in supermarkets. This poses a problem as nobody can detect this before purchasing, which is a potential health problem for society.

Students attending public schools have been effected by this, being a public college student, I know first hand the ramifications that can be seen from this. Many students fear that they are lacking the learning experience sufficient enough to ensure their success. Government should provide a blueprint to the Department of Education to carry out an alternative grading system for contingency. Take a look at the window below and form your own opinion on what you think.

Hand sanitizer has become an issue in the U.S. from an economic standpoint due to price gouging and profiteering. In my opinion I do not believe it is an issue for someone of free will to purchase a good and sell it back for profit if they so choose. Take a look at the window below explaining a situation concerning hand sanitzer and price gouging.

The tragedy of commons during the coronavirus pandemic is an unfortunate one during these times. Ventilators are a resource that is being consumed at the expense of others on a first come first serve basis. In my opinion, I believe it is the states' job to allocate resources efficiently for these emergency events, as well as the federal governments' response by activating the Federal Emergency Management Agency emergency funds established for such purpose. Take a look at the states responses to this problem below.

The coronavirus pandemic has single handedly taken 1.5 billion students from lecture learning environments to a stay-at-home learning model structured in the wake of the pandemic. This has led to an increase in demand for child care. The division of the increased burden of childcare between women and men will depend not just on labor force status, but also on the existing division of labor. The ability to telecommute and whether one or both members of the couple work in critical sectors will also play a role in determining how couples adjust to the increased need to spend time on childcare. Married women provide more childcare than married men on average. Among all married couples with children, the husbands provide 7.4 hours of child care per week on average, versus 13.3 hours for the wives.

Married women provide close to 60 percent of child care even among couples who work full time, and an even higher share if they have young children, when childcare needs are the highest. If we assume that the relative distribution of the burden stays at 60-40 and childcare needs rise by 20 hours/week during the crisis, full-time working women would need to increase their childcare hours by 12 hours vs. 8 for men.

The working paper written by Andrew Glover, Jonathan Heathcote, Dirk Krueger, & Jose-Victor Rios-Rull explains some of distributional implications caused by the coronavirus pandemic. Mitigation is costly and can become an economical problem for states that wish to allocate funds efficiently. The authors argued that costly mitigation redistribution reduces the desire of the government to enact such policies. They even suggested that the shutdown on April 12^th was too extensive. The elderly gain much more than the young from extensive reductions in economic activity than the young.

Those working in the partially shuttered sector are the most adversely impacted, especially when it is costly to soften the distributional consequences via public transfers. Epidemiological models show that households face a common trade-off between restrictions on social interaction that slow the virus transmission but which also depress economic activity. Slower viral transmissions accrue disproportionately to older households, which face a much higher risk of serious illness or death from infection. At the same time, the costs of reduced economic activity are disproportionately felt by younger households which face lower employment opportunity.

According to Bloomberg Opinion, a V-shape curve should show reflect the current downturn with a gradual turn around when economies across the nation open back up. The second fiscal quarter of the economy has been forecasted to plunge thirty plus percent, the lowest in history. The article below explains more in depth of the estimates and evidence of how much our economy will shrink.

One of the unfortunate effects that the coronavirus pandemic has had on us is death. The United States death toll confirmed is 59,000, while the worldwide death toll surpasses 200,000. Also students, in particular high school seniors, will be hampered with their decisions to attend out-of-state schools. Not being able to predict if this will be back, it is hard for students and schools to make the call for the fall 2020 semester. Right now the education community is in the middle of a wait-and-see from the higher ups for better instruction on how to proceed for the rest of the year.

By looking for places in the economy where people were forced to make trade-offs between dollars and risk of death we can value human life. Asked questions like what is the medical costs associated with that person's death? When a person dies, economists look at lost earnings, money that person would have earned if alive. The statistical value of a single life in the United States is ten million dollars.

The labor force was a major component in the determination of the value of life. Using today’s numbers, they basically find that on average workers earn about $1,000 a year more for taking on a one in 10,000 chance of dying on the job. If you have 10,000 of those workers, “then on average for that group there would be one expected death,” Viscusi explained. Finding out how many workers are home subtracted by essential workers, that number divided into the labor force should give us a hint at how many lives can be saved.

The paycheck protection program is a federally funded program designed for businesses that employ fewer than 500 people. Every business can ask for enough money to cover two and half months worth of payroll. The problem is that this program, meant to save the economy from collapse, is untested.

The 2020 coronavirus stimulus package is an emergency relief bill signed into law by President Trump. It is the largest in American history, at two trillion, and provides a one time cash payment of up to $1,200 to qualified Americans. If you filed taxes in 2018 or 2019, that tax return must reflect an adjusted gross income below $99,000 for single filers, $136,500 for heads of household, and $198,000 for married filers. You also will get a check if you are not claimed as a dependent or have a social security number.

The policies implemented by federal and state government, given what I know, are sufficient short term if the funds appropriated for this crisis were distributed efficiently. Failure to do so will not only negative affect the economy in the long term, but will leave many in unemployment as small businesses across the nation will be forced to shutter, leaving American workers out of a job. I think morally it is justifiable, but that money could've been allocated more efficiently.

What I think would have been more productive is a new foundation of safety net programs that match the valor of Franklin D. Roosevelt's "New Deal." Now is the perfect time to take bold action with the start of aggressive expansion of innovative infrastructure projects, marketing of exports, government subsidies, higher taxes and aggressive borrowing. These are just a few ways that the current administration can take a hard look at in terms of not only boosting the economy, but operating on a surplus.