Yes, scarcity is still an issue in the united states.  Scarcity is a situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants.  Scarcity is often confused with a shortage, however it is very different.  Scarcity requires us to choose and by doing so, we lose the next-highest-valued alternative.  In a capitalistic society, scarcity is dealt with choices and opportunity costs.  An example is seen in time, the United States does not have unlimited time to deal with certain issues over others.  There is a scarcity in time.  The U.S can chose to deal with issues such as poverty or issues such as war, by choosing to deal with one for 1 year, the other is lost as a year in opportunity costs

Suppose all of your friends (I assume you have many friends) decided to help you paint your house.  Would the marginal physical product decline as more friends helped?  Why or why not?

How does this concept relate to production costs? Be specific.

Is the process of competition, which results in the loss of profits for companies and the shutdown of those firms who cannot cover their costs in the best interest of the nation?  Defend your view.  Why is perfect competition considered to be the optimal market structure?

Perfect competition is considered the optimal market structure because it is a market structure in which the decisions of individual buyers and sellers have no effect on market price.  In the process of competition, which result in the loss of profit for companies and this shutdown of those firms who can not cover their costs, I believe that in a perfectly competitive market, the firm should follow the natural course which leads out of business.  If they shut down due to loss they should be let go and not saved because there are many similar firms.  

The purpose of advertising in a monopolistic competition is an attempt to build brand lotalty, some examples would be hamburger joints, clothing names, etc.  In the long run, in a perfect competitive market with low barriers to entry and exit, if there is a profit, producers enter the industry, supply shifts to the right and price falls to the min and average total cost.  If there is a loss, producers exit the industry, supply shifts left and rises to the minimum of average total cost.  At this point we have zero economic profit. 

In a monopsony the wage is where mrc=mrp intersects the marginal wage, however a price taking firm has no power in the labor market.  They take the going price where supply=demand.

            Unions tend to form where there is a monopsony power because monopsonies tend to under pay the labor market.

            When you put the union and the monopsony, you get a bilateral monopoly.  Basically when this happens everything turns into a negotiation for labor wages and the work.  The unions want to get everything in the favor of the workers while the monopsony wants to get everything in their favor and they ultimately end up meeting somewhere in the middle. 

What is the role of labor unions in the labor market?  Why did they arise?  Use economic concepts and terms in your answer.  Are they necessary?

Labor unions are worker organizations that seek to secure economic improvements for their members as well as safety, healthy and benefits.  They arose out of the necessity of protecting workers and the need to be paid with fare wages.  The unions collective bargaining is negotiating on compensation and working conditions.  The union would like to have the wage rate above the perfect competitive wage.  Their goal is to maximize economic rent.  Economic rent is the difference between what a worker would accept for the job and what they actually get paid while feather bedding which means to put limitations on the work or job.  I believe certain unions are necessary, especially when the work is being done under dangerous conditions, like the coal mines and the oil fields. 

a.  Most efficient-Most efficient would be to regulate output at efficient production where allocative efficiency – price= marginal cost=marginal revenue.  The pro is that the good would be sold below cost.  The con is that the gov.t would subsidize and we would pick up costs in our taxes. 

b.  Most profit maximizing would be to do nothing at all or the government would own and operate.  This would yield the largest profit.  Pro is that the wheat market is going.  The con is that the consumer is being gouged, by being over charged.

c.  Most expedient would be the average cost pricing which is the break even point with a fare return.  The pro is that the consumer will get to pay a fare price for the good and the con is that the firm will be including their heightened implicit costs into their production costs. 

What are the pros and cons of each of the preceding regulation measures?  Which do you believe is the best? Why? I believe the most expedient is best because the consumer is treated fair with price and the firm gets a fair return at the break even point