7. Consider a competitive labor market where the market demand and the market supply are given initially by QD = 1000 – 50P and Q = 50P, respectively. The quantity of labor is measured in number of people (assume that people are perfectly divisible) and prices are measured in RMB. (a) Suppose there is a recession and the demand for labor is reduced by 200 workers at every price level. Find the number of people who are unem- ployed as a result. (b) Suppose the government wants to help the newly unemployed by paying them 50% of the pre-recession equilibrium wage. What would be the total cost of this program to the government? How does the program affect the post-recession aggregate surplus? Is there a deadweight loss associated with this program? (c) Suppose the government wants to reduce unemployment, so it is consid- ering using the money that would have been spent on the unemployment benefit program on a wage subsidy program instead. In particular, the government will reimburse the employers t% of the wages paid. What is the value of t that will make the wage subsidy program have the same cost as the unemployment benefit program? How many additional workers will be hired as a result?

7. Consider a competitive labor market where the market demand and the market supply are given initially by QD = 1000 – 50P and Q = 50P, respectively. The quantity of labor is measured in number of people (assume that people are perfectly divisible) and prices are measured in RMB. (a) Suppose there is a recession and the demand for labor is reduced by 200 workers at every price level. Find the number of people who are unem- ployed as a result. (b) Suppose the government wants to help the newly unemployed by paying them 50% of the pre-recession equilibrium wage. What would be the total cost of this program to the government? How does the program affect the post-recession aggregate surplus? Is there a deadweight loss associated with this program? (c) Suppose the government wants to reduce unemployment, so it is consid- ering using the money that would have been spent on the unemployment benefit program on a wage subsidy program instead. In particular, the government will reimburse the employers t% of the wages paid. What is the value of t that will make the wage subsidy program have the same cost as the unemployment benefit program? How many additional workers will be hired as a result?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: A firm wishes to produce to Qunits of output using two inputs - ₁ and x2. The prices of the inputs…

A: Output to be produced = Q There are two inputs: x1 & x2 Therefore , Q = f(x1 ,x2 ) Price of x1…

Q: At the given wage and price level, Live Happley should hire Suppose that the price of strawberries…

A: Labor Input (Number of workers)Total Output (Pounds of strawberries)00118234348460570

Q: t an output level of 99, what is the cost minimizing combination of Labor and Kapital? At an…

A: Cost minimization refers to the process of reducing the expenses incurred by a business to produce a…

Q: 3. Suppose that the production function of an economy is given by Y = √N. The (representative) firm…

A: Production function : Y = N0.5 Utility function : log(C) + log(l) Demand for labor is derived by the…

Q: Consider a perfectly competitive labor market in which the demand for labor is given by E =…

Q: 1. Write down the value of the marginal product of labor for the firms. 2. Find the equilibrium…

A: In the labor market in Washington DC, there are many small firms that collectively have a…

Q: 7. What does it mean if two production factors are perfect substitutes (perfect comple- ments)?

A: (According to Bartleby Guidelines we are only allowed to answer one question at a time, it is kindly…

Q: Question Four a) TA worker chooses to work X hours per week, at a wage of $9 per hour. An overtime…

A: a) To analyze the relationship between the number of hours worked (X, Y, and Z) in this scenario, we…

Q: Suppose that in a competitive output market, firms hire labor from a competitive labor market (so…

A: Competitive equilibrium in the labor market occurs where quantity of labor demanded is equal to…

Q: (1) If the demand for product Y increases significantly, then A- the demand for the labor used to…

A: Dear student, you have asked multiple questions in a single post. In such a case, I will be…

Q: Suppose that the production of a certain product only requires one input, labor, and that the…

A: 1.500 2. The marginal product of labor (MRPL) is the adjustment of income that outcomes from…

Q: Suppose a firm is employing labour (L) and capital (K) such that MPK/MPL = PK/PL. If the price of…

A: Here Answer is “Employ more capital and less labour because MPK/MPL > PK/PL.”

Q: Q) The market demand for the output is P = 80 – Q, where Q is the output level and P is the price…

A: Given:

Q: Suppose a firm has the following widget production function: q=2K/₁2, the wage rate, w = $20 and the…

A: Given Production function: q=2K1/2L1/2 .... (1) w=$20 and r=$180 In short-run K is…

Q: Consider the labour market for farms during the harvest season. Assume the market is perfectly…

A: Disclaimer: Since you asked multi part question we are solving only first 3 subparts as per…

Q: Acme Inc. supplies rocket ships to the retail market and hires workers to assemble the components. A…

A: The price of a rocket ship in the retail market is $30,000.The cost of rocket ship components is…

Q: The figure to the right illustrates the demand curve (D) and the supply curve (s) for a labor…

A: The given figure shows that the equilibrium point is at 'e1' where demand for labor i.e. 'DL' demand…

Question

100%

7. Consider a competitive labor market where the market demand and the market
supply are given initially by
QD = 1000 – 50P and Q$ = 50P,
respectively. The quantity of labor is measured in number of people (assume
that people are perfectly divisible) and prices are measured in RMB.
(a) Suppose there is a recession and the demand for labor is reduced by 200
workers at every price level. Find the number of people who are unem-
ployed as a result.
(b) Suppose the government wants to help the newly unemployed by paying
them 50% of the pre-recession equilibrium wage. What would be the total
cost of this program to the government? How does the program affect the
post-recession aggregate surplus? Is there a deadweight loss associated
with this program?
(c) Suppose the government wants to reduce unemployment, so it is consid-
ering using the money that would have been spent on the unemployment
benefit program on a wage subsidy program instead. In particular, the
government will reimburse the employers t% of the wages paid. What is
the value of t that will make the wage subsidy program have the same cost
as the unemployment benefit program? How many additional workers will
be hired as a result?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Which one of the following statements is incorrect? a) Equilibrium in a perfectly competitive labour market occurs where the demand for labour is equal to the supply of labour. b) Equilibrium in a perfectly competitive labour market occurs where the quantity of labour demanded is equal to the quantity of labour supplied. c) Equilibrium in a perfectly competitive labour market is the result of the interaction between the demand for labour and the supply of labour. d) The individual supply of labour bends backwards when the income effect becomes stronger than the substitution effect.
The equilibrium quantity of labor increases and the equilibrium wage decreases when: A) labor supply shifts to the right, if wages are flexible, B) labor supply shifts to the left, if wages are flexible. C) labor demand shifts to the left, if wages are flexible. D) labor demand shifts to the right, if wages are flexible.
Production function for firm is Ys=ln(Ld)Utility function is U(Yd, Ld)= Ys+ln(1-Ls)1) Write down maximization problem of firm and find labor demand curve2) Write down maximization problem of household and find labor supply curve3) Write down market clearing conditions4) Calculate equilibrium employment and real wage5) If the price is equal to $2, what would be the nominal wage in equilibrium
5.
(c) Let us now turn to the labor market for grocery store workers in Little town. Recently one of the last two grocery stores in Little town closed leaving only one employer for grocery store workers in this area. This labor market is not very competitive. What type of market structure is this? (d) Draw a typical supply curve (i.e. average expenditure), marginal expenditure, and demand for the grocery store in Little Town. Label the equilibrium wage and number of grocery store workers. (e) Suppose that some time has passed and the population has grown in Little Town and there are now many grocery stores. Now suppose that the grocery store workers unionize. Draw a graph to depict the equilibrium wage and number of workers in this new market.
Consider a perfectly competitive labour market that is initially in equilibrium. The country within which this labour market is located has not previously accepted immigrants, but is now considering whether or not to change this policy and start accepting immigrants. One of the key ideas being considered is the impact that immigrants will have on the equilibrium wage earned by local workers in the aforementioned labour market. The country's Prime Minister has asked you to provide them with advice on the matter. a) First, the Prime Minister would like to better understand the reasons why the introduction of immigrants into their country might result in a lower equilibrium wage in the aforementioned perfectly competitive labour market. Describe the general logic as to how the introduction of immigrants into a perfectly competitive labour market might result in a lower equilibrium wage. b) Next, the Prime Minister would like to better understand the reasons why the introduction of…
Consider an economy with 2 workers. If the value of the marginal product of labor (VMPL) is $50 and the marginal product of labor (MPL) is 15, what is the market price (P)? Provide your answer below:
1. Consider a static labour supply model for an individual. Assume that the person works a positive number of hours. Assume that the utility function is of the following form: U=x0.5 +8(T-h)(0.5) where x is consumption and his hours of work, and 8 is a parameter of the utility function. The person is paid a wage of w for each hour worked. The person has no other source of income other than employment earnings. Assume that the price of x equals 1. a) Specify the utility maximization problem, write down the Lagrange function, and solve for the first order conditions. b) Solve for the MRS condition between consumption and hours of work. c) Assume that 8=2 if the person has a child living at home, and 8=1 otherwise. Explain (and either show mathematically or graphically) how this will affect the optimal number of hours of work of the person.
The table below shows levels of employment (Labor), the marginal product at each of those levels, and the price at which the firm can sell output in a perfectly competitive market. Labor Marginal Product of Labor Price of the Product Value of the Marginal Product 1 7 $3 6 $3 3 $3 4 4 $3 3 $3 a) Complete the table finding the Value of the Marginal Product (show your work!). b) If the wage rate is $15, what is the firm's profit maximizing level of employment? JUSTIFY your answer! 2.
Suppose the local economy experiences an influx of both skilled and unskilled workers, what will happen to prices of goods and services? Group of answer choices Since this increases the supply of labor, prices and wages both decrease. Since this increases the demand for labor, prices and wages both increase. Since this decreases the supply of labor, prices and wages both decrease. Since this increases the marginal product of labor, prices and wages both decrease. A worker on a Texas oil rig is likely to earn _______ than a reception because _________. Group of answer choices less; the job has unattractive characteristics. more; the job is more fun. more; the job is more prestigious. more; the job is more dangerous. please answer two questions
Suppose the hourly wage rate is $14, the rental price of capital is $2 and the price of output is constant at $42 per unit. Firm's production technology is q = 4K0.25 0.75, the marginal product of employment is MPE =3K0.25E-0.25 and the marginal product of capital is MPK = K™ 0.75 0.75. What is firm's optimal demand of labor if firm plans to produce q=19 units of outputs in the long-run? (please keep 1 decimal place in your answer)
Consider the Labor Economics Question. This will provide insight into the idea of the optimal number of workers and the value of the marginal product of labor. If wages in the restaurant is $16.80 per hour and the price of a Hamburger is $8.30 and the production function for the workers is: Q = 11L – 0.25L2 How many workers should Your Restaurant employ during the lunch hour to maximize profits? 1 Point (note—the value of the marginal product of labor and the marginal revenue product are the same) We maximize profits which are total revenues less total costs: