(5) The Trump administration has made promises to bring back coal jobs to coal m
ID: 1104019 • Letter: #
Question
(5) The Trump administration has made promises to bring back coal jobs to coal mining regions around the country, and might seek the advice of economists as to how to keep this promise. Let us prepare for this eventuality, taking West Virginia (where there's a particularly high number of previously employed coal minors) as an example. Suppose that coal production in West Virginia is undertaken by competitive firms with the Cobb-Douglas production function y-ALgas-a-, where and are positive and sum to a number less than one. Total coal output in tons is given by y, at a price p. L denotes labor employed, at a wage w; K denotes capital, at a rental rate r; and S denotes the stock of coal reserves in West Virginia. a) If labor and capital each account for half the cost of mining coal, and + 1/2, then how much would coal output have to increase to double employment (supposing wages and other prices remained unchanged)? b) One tool the administration could manipulate to increase output is the price of coal. Provide a mathematical expression and a graph describing the relation- ship between coal supply and price, and between demand for labor (in the coal industry) and output price. c) Raising energy prices is thought by most economists to have negative effects on the rest of the economy. Suggest some other policy instruments that might also increase demand for coal minors.Explanation / Answer
Raising energy prices is not considered as prudent economic policy measured because it would raise input costs thereby fuelling inflationary pressure in the economy and declining real incom.
Thus, demand for coal can be increased by exporting the same in international markets, raising demand for capital goods which includes machinery etc. Which require coal in manufacturing of steel further, demand for coal can be increased by promoting construction activies which would raise demand for cement and subsequently for coal.
Coal can be used through gasification process in manufacturing of fertilizers.
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