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Part I

The government decides to tax cookbooks because they feel that they encourage overeating and can lead to health issues, such as obesity and heart disease. Answer the following:

• What type of tax is this? Explain.
• What happens to the supply of cookbooks?
• Who pays the tax at the end?
• Is this a good way to finance programs to improve health?
• What other types of tax can the government use to increase revenues?

• Part II

  Justcookbooks.com becomes wildly successful in the United States, and you decide to export overseas. Answer the following:

  • Does this reflect an absolute or a comparative advantage?
  • Name some issues that you will encounter as you become a multinational corporation.

  • Part III

    In the article entitled “The Economic Effects of Labor Unions Revisited,” Vedder and Galloway attempt to prove statistically, using historical data, that labor unions do not have a good effect on the economy. Read the article, and explain the following microeconomic concepts that the authors discuss and how they are related to unions:

    • Demand, supply, and equilibrium wage rates of labor
    • Unemployment
    • Real GDP and economic growth
    • Income per capita
    • Population growth and aging
    • The article focuses on harmful economic effects, but also mentions some positive aspects. What are they?