the Lewis model, = 25 - 2L nere W = urban wage rate, L labor hired in the urban %3D anufacturing sector, the rural subsistence wage is 5, then the capitalists' income in the ban manufacturing sector is:
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- Suppose a firm’s technology requires it to hire 100 workers regardless of the wage level. The firm, however, has found that worker productivity is greatly affected by its wage. The historical relationship between the wage level and the firm’s output is given byWage Rate Units of Output$ 8.00 65$10.00 80$11.25 90$12.00 97$12.50 102What wage level should a profit-maximizing firm choose? What happens to the efficiency wage if there is an increase in the demand for the firm’s output?“Factor prices determine factor proportions used in production of goods in the H-O model.”Explain with the help of a graph.Consider a two-sector economy that employs a total of 105 units of a single input, labor. Ny of these units are allocated to sector 1, where the wage is 90 for the top five workers in that sector and zero for all others. (Both the wage for the top workers and the number who receive that wage are invariant to changes in Ng) The remaining N2= 105 - Ngunits of labor serve in sector 2, where every worker receives a wage of 10. All workers in sector 1 have an equal probability of being among the top five workers, 6/Ng. and all workers are risk neutral. Instructions: Round your answers to the nearest whole number. a. How many workers will work in sector 1? N1 = b. What will be the value of GNP for the economy? GNP = c. How would your answers differ if there were a 50% tax on the earnings of workers in sector 1? Workers in sector 1: GNP:
- Calculate the labor and capital share of output: Y=ALαK1-α A= 1.5 α= 0.5 L=Labor K= Capital Factor Markets: Labor Supply (L^S)= 100 Labor Demand (L^D)= 200-5(W/P) Supply of Capital (K^S) = 100 Demand for Capital (K^D)= 200-4(R/P) (W/P)= real wage rate (R/P)= real rental ratesitier the production model studied in Chapter 4. Final output in the economy is pro- duced using capital K and labor L. The production function is: Y = ĀK'/³L^/5 Assume that the supply of all inputs are exogenous and equal to L and K. Perfectly compet- itive firms are price-takers and choose how much capital and labor to demand by maximizing profits. Let w and r denote the wage and rental rate of one unit of labor and capital respec- tively. (a) What are the 5 endogenous variables in this model? Also list the exogenous variables and the parameters and provide a brief explanation of each. (b) Show the first order conditions for labor and capital. Explain the intuition for why these conditions are optimal for a firm. Are there diminishing returns to these inputs in this model? ( (c) Show that the solution for output per capita can be written as y = Ak/5. Observed GDP per capita is 3 in this economy. Capital per person is 32. If Ā = 1, what does this model predict for GDP per person?…For each of the following sectors, identify (no explanations needed) the most important determinant/factor in its R (bid rent curve): • manufacturing sector: • office sector: • household sector:
- Consider the following production function: q = 9LK + 6L² – Assuming capital is measured on the vertical axis and labor is measured on the horizontal axis, determine the value of the marginal rate of technical substitution when K= 30 and L= 10. MRTS = -. (Enter a numeric response using a real number rounded to two decimal places.) 20 tv MacBook Air F6 FB 10 F3 23 2$ & з 4 6 7 8 { [ E Y U P D F G J K > C V N M command option - .. .- Bgros profit per unit not including labour cost- $100 # Workers Output 1 20 2 36 3 48 4 56 5 60 6 62 If the wage rate is $1,000 a week, how many workers should the factory hire? If a surge in popularity for the factory’s brand allows them to raise the product price such that the gross profit rises to $150, how many workers will the factory hire now? Calculate the number of garments produced in each of the two cases above.Given: Q = -0.0250 L3 + 1.5 L2 a) Derive the AP and MP equations b) What is the level of Q where AP and MP of labor is maximum?
- Consider the model of a firm that produces final goods using R&D and components as inputs, with cost dataas follows:Assembly: Total cost of production = PAQA = 400Earnings of High-Skilled Labor = WHHA = 100Earnings of Low-Skilled Labor = WLLA = 200Earnings of Capital = RKA = 100R&D: Total cost of production = PRQR = 400Earnings of High-Skilled Labor = WHHR = 175Earnings of Low-Skilled Labor = WLLR = 125Earnings of Capital = RKR = 100A) In which factor(s) is assembly intensive? In which factor(s) is R&D intensive?B) Suppose that due to the opening of trade, the price of assembly falls by ∆PAPA= −20%, the price of R&Dremains unchanged, ∆PRPR= 0%, and capital’s share earnings remains constant.C) What has happened to the relative wage of high-skilled/low-skilled labor? Does this match the predictions of the offshoring model?onsider the following production function: q=96LK + 25L2 13 sume capital is fixed at K=25. what level of employment does the marginal product of labor equal zero? e marginal product of labor equals zero when %1 (Enter a numeric response usingConsider a simple demand-and-supply model of a competitive labour market in a small town. The demand and supply curves for labour are given by Demand: w= 22 - 3LD Supply: w=4+3LS where w is the wage ($ per hour) and L is the number of hours of employment (measured in thousands of hours per month). a. Use the line drawing tool to plot the demand and supply curves in the graph at the right. Use points with labour hours value of 0 and 5 to draw the lines. Label the lines properly. Carefully follow the instructions above, and only draw the required objects. C Wage ($ per hour) 24- 22- 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 0- 0 Labour Market 2 3 4 1 Labour (thousands of hours per month) + 5