EC 242 Module 6 Exercises

1. How is the poverty rate calculated? What does the poverty line mean?

2. In Westeros the population is 300 million, and 50 million people are living below the poverty line. What is the poverty rate?

3. Preventive care is not always cost-effective. Suppose that it costs $100 per person to administer a screening for a particular disease. Also, suppose that if the screening finds the disease, the early detection given by the will prevent $1,000 of costly future treatment.

a. Imagine giving the screening test to 100 people. How much will it cost to give those 100 tests? Imagine a case in which 15% of those receiving the test positive. How much future costly treatments will be prevented? How much is saved by setting up a screening system?

b. Imaging that everything is the same as in (a) except now only 5% of those receiving the test positive. In this case, how much in future costly treatment will be prevented? Is there a loss or gain by setting up the screening system? How much?

4. Mexico has daily (rather than hourly) minimum wage laws. In 2016, the daily minimum wage in Mexico was about 73 pesos per day, and the exchange rate between Mexican pesos and the US dollar was about 17 pesos per one dollar.

a. In 2016, what was the Mexican daily minimum wage in terms of US dollars?

b. Given that Mexican employees typically work 8-hour days, about how much per hour is the Mexican minimum wage in terms of dollars?

c. In 2016, the federal minimum wage in the US was $7.25 per hour. How many times larger was the hourly US federal minimum wage than the hourly Mexican minimum wage?

d. If unskilled workers have a tendency to migrate to where they can obtain the highest compensation for their labor, which country is more likely to be receiving low-skilled immigrants?