Suppose that the production function is Y =9 x0 SN5 With this production function, the marginal product of labor is MPN = 45 K 5/N5 The labor supply curve is NS = 115x[(1 - 1)xw, where w is the real wage rate, t is the tax rate on labor income, and hence (1 - )xw is the after-tax real wage rate. The capital stock is K= 25. Assume that the tax rate on labor income, t, equals zero The equilibrium level of the real wage is 1.45 (Round your answer to two decimal places) The equilibrium level of employment is (Round your answer to one decimal place) Now, suppose the tax rate is changed to t 02. Now the equilibrium level of the real wage is (round your answer to two decimal places). With the tax rate now at t-0.2, the equilibrium level of employment is (round your answer to one decimal place)

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Suppose that the production function is Y=9 K 5N5
With this production function, the marginal product of labor is MPN = 45 KO 5/N5
The labor supply curve is NS =115x[(1 - 1)xw where w is the real wage rate, t is the tax rate on labor income, and
hence (1 - 1) xw is the after-tax real wage rate.
The capital stock is K= 25.
Assume that the tax rate on labor income, t, equals zero.
The equilibrium level of the real wage is 1.45 (Round your answer to two decimal places)
The equilibrium level of employment is (Round your answer to one decimal place)
Now, suppose the tax rate is changed to t= 0.2. Now the equilibrium level of the real wage is (round your answer to two
decimal places).
With the tax rate now at t=0.2, the equilibrium level of employment is (round your answer to one decimal place).
Transcribed Image Text:Suppose that the production function is Y=9 K 5N5 With this production function, the marginal product of labor is MPN = 45 KO 5/N5 The labor supply curve is NS =115x[(1 - 1)xw where w is the real wage rate, t is the tax rate on labor income, and hence (1 - 1) xw is the after-tax real wage rate. The capital stock is K= 25. Assume that the tax rate on labor income, t, equals zero. The equilibrium level of the real wage is 1.45 (Round your answer to two decimal places) The equilibrium level of employment is (Round your answer to one decimal place) Now, suppose the tax rate is changed to t= 0.2. Now the equilibrium level of the real wage is (round your answer to two decimal places). With the tax rate now at t=0.2, the equilibrium level of employment is (round your answer to one decimal place).
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