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?