A domestic economy can produce wine or bread using labor with the following technology:Yw = 21Y6 = 0.51Preferences in this economy are Cobb-Douglas and given by:u (Cu, Cb) = 0.2 log cu + 0.8 log csTotal labor endowment in this economy is 1 million workers that are perfectly mobile across sectors.A foreign economy is instead characterized with the following technology:Y = 31%3DThe foreign economy has the same preferences as the domestic, but a labor supply of 10million workers.What is the equilibrium competitive wage rate in units of bread for the home economy under free-trade?3/222/31/2

Technology for the domestic country: yw = 2lw yb = 0.5lb Technology for the foreign country: y*w =…

Answered: A domestic economy can produce wine or…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each country i = H, F have preferences over two goods and y. In each country there is only one factor of production, labour, which is perfectly mobile between industries but immobile between countries. The total labour endowment at Home is LH = 10 and the total labour endowment in Foreign is LF = 10. The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units of good 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 good y per unit of time. Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardless of their prices. That is, Cri = 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 Home and Foreign. (b) Derive the production possibilities frontier (PPF) for Home and Foreign and plot it in a…
Suppose that a unit of capital costs three times as much as a unit of labor.If a firm currently has a technology such that MPK =50, MPL =30, how should this firm adjust its capital and labor choices?
Consider Special City that manufactures light fixtures that are sold around the world. Draw their base case Labor Market graph. Now assume there is a national shortage of glass that Special City manufacturers use to create their light fixtures. Show what would be the effect on your Labor Market graph. Lastly, assume the manufacturers change their manufacturing process to use less glass but inadvertently create a very noticeable increase in the smog levels that makes it hard to breathe. Show another variation to reflect the change in your labor market graph, be sure to indicate the effects of the changes on for each of these market changes or combine the graphs, just be sure the changes and new equilibria are legible:
Elsa and Anna are two students each considering whether to pursue a college education before entering the job market. For each worker, an education level of E = 1 indicates that she has completed college and earned a degree, while E = 0 indicates she has not. Elsa can generate V E = 36 worth of output per hour while Anna can only produce V A = 12 per Obtaining a degree is costly, and the students must pay for their educations by taking out student loans that will be repaid during their working years. Elsa is a naturally capable student so the degree costs her the equivalent of CE = 18 per hour in future wages, whereas Anna struggles with her studies and must pay CA = 27 per hour. Note that their education levels do not impact their productivity. Hans is an employer who cannot observe the workers’ innate abilities but can observe their education levels. The labor market is competitive, so that Hans must always offer a wage equal to his reservation price, and thus makes zero profit. a)…
Elsa and Anna are two students each considering whether to pursue a college education before entering the job market. For each worker, an education level of E = 1 indicates that she has completed college and earned a degree, while E = 0 indicates she has not. Elsa can generate V E = 36 worth of output per hour while Anna can only produce V A = 12 per Obtaining a degree is costly, and the students must pay for their educations by taking out student loans that will be repaid during their working years. Elsa is a naturally capable student so the degree costs her the equivalent of CE = 18 per hour in future wages, whereas Anna struggles with her studies and must pay CA = 27 per hour. Note that their education levels do not impact their productivity. Hans is an employer who cannot observe the workers’ innate abilities but can observe their education levels. The labor market is competitive, so that Hans must always offer a wage equal to his reservation price, and thus makes zero profit. a)…
Consider two people, A and B, who are trying to divide 10 units of X and 10 units of Y. They feel this way, Ua(x,y) = xy Ub(x,y) = x^(1/2)y^(1/2) Find an equation that shows all efficient divisions of X and Y Find equilibrium at Ya = 8 Thank you.
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 F. Suppose that the equilibrium price of good x (keeping the price of good y as 1) is equal to 1. Determine the optimal production and consumption both at Home and Foreign when they open up to trade. Depict this in graph.
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 graph…
Assume an economy consists of two agents, a and b. Individual a has available 1 unit of time which he divides between leisure ra and labor ℓa . Likewise, individual b has available 1 unit of time which he divides between leisure rb and labor ℓb. Commodity x is produced by one competitive firm according to the production function: x=√L , where L denotes labor hired. The firm is fully owned by agent a. The utility function of the two individuals are: u(xa,ra)=xara and u(xb,rb)=xbrb . Taking the price of labor as the numéraire (i.e. w=1), find the competitive equilibrium for this economy.
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:
Consider the (long run') effects of inward labor migration in the Heckscher- Ohlin Model. Assume that the country trades and the relative price of two goods X and Y stavs constant. Assume X is relatively labor intensive. Intuitively explain how the increase in labor supply affects (relative) output of X and Y and how it affects factor prices ('Rybczynski Theorem'). You may want to use graphs.
Now imagine that the production function in City B changes to G(L), such that the graphs below describe the outcome when the populations of the two cities remain the same as before the change. MPLA MPL, MPL2 MPL, F'(L) G'(L) LA LA1 L81 Answer the questions below with this new information.

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