2 Suppose there are 92 workers in the economy, with overall labour supply LS=92. The labour demand in Sector A is given by LPA=118-2.6WA and labour demand inSector B is given by LDB=92-3.8WB.When graphed with the conventional axes, the slope of the aggregate labour demand curve isand its vertical intercept isAssuming the neoclassical model of perfect competition holds, the competitive wage would be w=$Suppose sector A unionizes and sets the wage at $30. Sector A will employworkers. The number of workers previously employed insector A who will spill over into sector B is equal toThere will now beworkers employed in sector B. Thewage in sector B will be equal to $. In this economy the union density is%.The relative wage gap for union workers is% while the relative wage gain is%. The counterfactual wage is $If the contract curve is vertical when the wage is set at $30,workers will spill over into sector B and the wage in sector B will be wg=$If the contract curve is not vertical, but 9 workers decide to wait in unemployment in sector A, the wage in sector B will be wg=$

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Suppose there are 92 workers in the economy, with overall labour supply LS=92. The labour demand in Sector A is given by LDA=118-2.6Wa and labour demand in Sector B is given by Lºe=92-3.8WB. When graphed with the conventional axes, the slope of the aggregate labour demand curve is and its vertical intercept is Assuming the neoclassical model of perfect competition holds, the competitive wage would be w=$

Suppose there are 92 workers in the economy, with overall labour supply LS=92. The labour demand in Sector A is given by LDA=118-2.6Wa and labour demand in Sector B is given by Lºe=92-3.8WB. When graphed with the conventional axes, the slope of the aggregate labour demand curve is and its vertical intercept is Assuming the neoclassical model of perfect competition holds, the competitive wage would be w=$

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.11P

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Suppose an economy has the following production function: Y = AK L where A = 10, K 50, and L= 100. The current nominal wage is $20 and the price level of output is $4. Based on the theory of distribution, firms should O hire new workers to increase profits. O fire some current workers to reduce losses. O keep the number of workers at the current level. O the firms labor decision cannot be determined.
hy does a measure of labor productivity—the output produced per worker– rise for many firms during recessions? During the boom years period of 2005through November 2007, the annual average output per worker was lower in U.S.manufacturing than during the Great Recession of 2007–2009 as well during therelatively low-demand years since then through 2013.Firms produce less output during recessions as demand for their products falls.Consequently, firms typically lay off workers during recessions. Thus, whetheroutput per worker rises or falls depends on whether output or employment fallsby more. The labor productivity pattern over the business cycle differs across in-dustries. If we know about a firm’s production process, can we predict whetheroutput produced per worker will rise or fall with each additional layoff?
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In the context of a perfectly competitive model of the labour market, an increase in technologythat raises the marginal product of labour at any given level of employment would be expected, inequilibrium, toa) reduce the amount of labour required to produce a given amount of output and hence increaseunemployment.b) shift the labour demand curve outwards and lead to an increase in employment and wages.c) have no effect upon labour supply or labour demand curves and hence have no impact onemployment or wages.d) reduce the supply of labour to the market and result in an increase in wages but a fall inemployment Why the correct answer is B?
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