EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Question
Chapter 10, Problem 1NP
a)
To determine
To ascertain: The equilibrium levels of output, hours worked, real wages before and after the productivity shock.
b)
To determine
To ascertain: The equilibrium levels of output, hours worked, real wages before and after the productivity shock.
c)
To determine
To ascertain: Whether a calibrated RBC model fit the fact that real wage is only slightly procyclical if the labor supply is relatively insensitive to the real wage.
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The production function in an economy is.
Y = 5(4.00N-0.0188N²),
where the marginal product of labor is given by:
MPN = 5(4.00 -0.0376N).
The equation for the labor supply curve is:
NS = 48.0 + 8(1 - t)w,
where NS is the amount of labor supplied, w is the real wage and t is the tax rate on wage income.
The tax rate is t = 0.20.
Determine the labor demand function. (Enter your responses rounded to two decimal places);
-0-0w
ND=
A production function has two inputs: domestic labor (Edom) and foreign labor (Efor.) The market is originally in equilibrium as shown below, and the production budget is fixed. Suppose a shock occurs that increases the marginal product of domestic labor. Assuming no changes in domestic or foreign wages, what will happen to the quantities of domestic and foreign labor employed?
Initial long run equilibrium (prior to shock):
a. The firm will hire more domestic workers and fewer foreign workers.
b. The firm will hire more foreign workers and fewer domestic workers.
c. The firm will hire more domestic workers but will continue to hire the same number of foreign workers.
d.The firm will hire more foreign workers but will continue to hire the same number of domestic workers.
A producer has the following technology.y= 6K^(1/2)L^(1/2)
a) Prove formally that the production function exhibits constant returns to scale (use “λ” argument).
b) Find analytically MPL and MPK. Is MPL increasing, decreasing, or constant inL? Is MPK increasing, decreasing, or constant in K?
c) Short-run: Given stock of capital ̄K= 1 find labor demand (formula) of a competitive firm. Find equilibrium real wage rate if labor supply is given by Ls= 9 (one number).
d) Assume again ̄K= 1 and that Ls= 9. The government adopts a real minimum wage of wmin/p=(3/2). Find labor demand (one number) and the unemployment rate (one number). Please depict the equilibrium on a graph with the real wage on the vertical axis and labor on the horizontal axis, indicating the equilibrium quantity of labor, wage, and unemployment, as well as the relevant curves.
e) Find the cost function given prices of inputs wK= 4 and wL= 1 (formula). Plot the cost function on a graph, indicating the slope of the cost…
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