(a) Why does structural unemployment happen? Explain the sources of structural unemployment. (b) Of all adult workable people in a country, 1,000 are looking for jobs, 9,000 are working, and 2,000 are no longer looking for jobs. Using this information, calculate the labor force participation rate and the unemployment rate.
(a) Why does structural unemployment happen? Explain the sources of structural unemployment. (b) Of all adult workable people in a country, 1,000 are looking for jobs, 9,000 are working, and 2,000 are no longer looking for jobs. Using this information, calculate the labor force participation rate and the unemployment rate.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:2. (a) Why does structural unemployment happen? Explain the sources of structural
unemployment. (b) Of all adult workable people in a country, 1,000 are looking for jobs,
9,000 are working, and 2,000 are no longer looking for jobs. Using this information,
calculate the labor force participation rate and the unemployment rate.
1 1
3. Imagine we live in a classical world. Suppose that the production function is Y = LZK²,
where L is the amount of labor and K is the amount of capital. The economy has 100
units of labor and 100 units of capital.
a. Does the production function show Constant Returns to Scale? Why?
b. Derive an expression for the marginal product of labor. Is the marginal product of
labor diminishing? How does an increase in the amount of capital affect the marginal
product of labor? Explain.
c. What are the real wage and rental price of capital?
d. What is the income share paid to labor? What is the income share paid to capital?
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