8 In the labour market model,the reservation wager(0) = 3/10and productivity0 € {1,2} withProb(0 = 1) = Prob(0 = 2) = 1/2Derive all competitive equilibria in the marketand discuss the efficiency for each competitiveequilibrium.

The labor market is the market in which the labor demand and labor supply curve are equal to each…

Business

Economics

8

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter29: Resource Markets

Section: Chapter Questions

Problem 5E

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Consider a Sraffa system that describes production with a surplus. Assume that the whole of the wage is variable. The number of commodities in the system is ?. Some are non-basic commodities. . State the economic meaning of the viability condition and express it mathematically. . Assume that the viability condition is satisfied and the rate of profit is given exogenously at a level that is lower than the maximum rate of profit. Explain, with the help of the relevant theorem, why the solution for prices must be nonnegative. NOTE: You need to use only three equations, one for specifying the numeraire, the second for expressing the final solution of the price equations, and third for expressing the condition for nonnegative prices.
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Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cxi = Cyi, i = H, F A. Calculate the opportunity cost of producing one additional unit of good x in terms of units of good y in Homeand Foreign. B. Derive the production possibilities frontier (PPF) for Home and Foreign and plot it in a…
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Give one example of external economics of scale?