Use a graph of labor input and its marginal product to argue that in the specific factors model(i.e. in the short run), an inflow of labor to a country reduces wages in the country. How are the rental rates of specific factors affected? see figure 5-2 in the slides. The rental rates of specific factors rise, because their marginal products rise due to an increase in labor intensity.
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- Suppose that land is specific to corn, capital is specific to automobiles, labor is mobile between sectors, and payments are as follows: Sales revenue = 400; payments to labor = 100; payments to capital = 300 Corn:Sales revenue = 300; payments to labor = 250; payments to land = 50. Holding the price of automobiles constant, suppose the increase in the price of corn is 10% and the increase in the wage is 5%. What is the impact of this on the rental of land and the rental of capital?There are two factors of production, X and Y. They are being used to produce a fixed amount of output called A. If the amount of output, A is held constant, and the isoquants are convex, would the price of X going down always mean less of Y is used? Explain why or why not by explaining through the use of a graph.What can be determined by the slope of the curve. The relationship between the relative price of cigars to soyabean (Pc / Ps) and the wage-rental ratio (w/r) is depicted by the SS labelled curve. Relative price of cigars, Pc/Ps SS Wage-rental ratio, w/r a) Neither good is capital-intensive b) Both are labor-intensive. c) Both are capital-intensive. d) Cigars are labor-intensive while soyabeans are capital-intensive.
- Some economists believe that the US. economy as a whole can be modeled with the following production function, called the Cobb-Douglas production function: Y = AK¹/32/3 where Y is the amount of output K is the amount of capital, L is the amount of labor, and A is a parameter that measures the state of technology. For this production function, the marginal product of labor is MPL = (2/3) A(K/L)¹/³. Suppose that the price of output P is 2, A is 3, K is 1,000,000, and L is 1/100. The labor market is competitive, so labor is paid the value of its marginal product. a. Calculate the amount of output produced Y and the dollar value of output PY. b. Calculate the wage W and the real wage W/P. (Note: The wage is labor compensation measured in dollars, whereas the real wage is labor compensation measured in units of output)Explain what you understand partial equilibrium analysis to be. Describe what the term "labour productivity" means.In our paper airplane company, some inputs were fixed and some were variable. Match the input to whether it was VARIABLE or FIXED. Paper- Stapler- Staples- Employees- Production space-
- Suppose that you are starting up a lawn-raking business. All of your workers are required to supply their own rakes, so the only cost to you is hiring labor at an hourty rate. Suppose that the market price of raking someone's yard is $50 per lawn and the hourly wage is $25 per hour. The following graph shows the production function (PF) for your business. On the following graph, use the green line (triangle symbol) to plot the daily isoprofit curve that indicates the profit-maximizing level of output. (Hint: Derive the slope of the isoprofit curve and then move the curve up or down until it's in the position you warnt; this is because you do not know the amount of profit that will yield the desired curve.) Then use the black point (plus symbol) to indicate the profit-maximizing level of labor and output per day. Note: You will not be graded on any adjustments made to the graph. 100 90 Isoprofit 30 Profit Max 40 FF 20 LABOR Hours per day LAWNS RAKED PER DAYIn the short‑run specific‑factors model, consider a decrease in the stock of land. For example, suppose a natural disaster decreases the quantity of arable land used for planting crops. Round values to the nearest one-half unit. a. Demonstrate a change in the supply of land on the accompanying graph. b. New equilibrium wage is? c. New quantity of agricultural labor is?Brian uses wool (K) and labour (L) to produce t-shirts (q). The production function is: q = min{1/3L, 2K}. The inputs are perfect complement.If he uses 0.5 kg of wool and 3 hours of labour, he can produce 1 t-shirt. Draw an expansion path on a diagram and derive an expression for the expansion path. How does it depend on the wage and the price of wool?
- Which of the following statements are true? A basic assumption of the theory of production is that: A firm cannot borrow money to finance its input expenditures. A firm can buy as much labor and capital as it desires in the long-run A firm can reduce the number of workers it uses, but it cannot adjust how much capital it uses in the short-run When the marginal product of labour starts falling, the firm must cease production a. II only b. II and III c. I, III and IV d. II, III and IV11. The backward-sloping labor supply curve Frances has 80 hours per week to devote to working or to leisure. She is paid an hourly wage and can work at her job as many hours a week as she likes. The following graph illustrates Frances's weekly income-leisure tradeoff. The three lines labeled BC,, BC2, and BC3 illustrate her time allocation budget at three different wages; points A, B, and C show her optimal time allocation choices along each of these constraints. BC3 1200 BC2 800 C BC, 400 A 35 40 45 LEISURE (Hours) INCOME (Dollars) ו םWhat is the marginal physical productivity (MPP) of the inputs given the function Q=18x21+2x1x2+2x22 ? Select one: a. MPPx1=36x1+2x1MPPx2=2x1+4x1 b. MPPx1=36x1+2x1MPPx2=2x2+4x2 c. MPPx1=36+2x2+2MPPx2=2x1+4x2 d. MPPx1=36x1+2x2MPPx2=2x1+4x2