The effect on the market interest rate when the purchase price of capital increases: An increase in the productivity of capital. A shift in preference toward present consumption and away from future consumption. Concept Introduction: The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Question

As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.

Answer 1

Question

Chapter 13, Problem 6P

A

To determine

The effect on the market interest rate when the purchase price of capital increases:

An increase in the productivity of capital.

A shift in preference toward present consumption and away from future consumption.

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

B

To determine

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

C

To determine

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

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As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.

Published in 1980, the book Free to Choose discusses how economists Milton Friedman and Rose Friedman proposed a one-sided view of the benefits of a voucher system. However, there are other economists who disagree about the potential effects of a voucher system.

The following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. a. Calculate the values of profit, consumer surplus, and deadweight loss, and illustrate these on the graph. b. Repeat the calculations in part a, but now assume the monopoly is able to practice perfect price discrimination.

Answer 2

Question

Chapter 13, Problem 6P

A

To determine

The effect on the market interest rate when the purchase price of capital increases:

An increase in the productivity of capital.

A shift in preference toward present consumption and away from future consumption.

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

B

To determine

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

C

To determine

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

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Answer 3

Question

Chapter 13, Problem 6P

A

To determine

The effect on the market interest rate when the purchase price of capital increases:

An increase in the productivity of capital.

A shift in preference toward present consumption and away from future consumption.

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

B

To determine

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

C

To determine

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

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Answer 4

Question

Chapter 13, Problem 6P

A

To determine

The effect on the market interest rate when the purchase price of capital increases:

An increase in the productivity of capital.

A shift in preference toward present consumption and away from future consumption.

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

B

To determine

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

C

To determine

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

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Answer 5

Chapter 13, Problem 6P

A

To determine

The effect on the market interest rate when the purchase price of capital increases:

An increase in the productivity of capital.

A shift in preference toward present consumption and away from future consumption.

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

B

To determine

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

C

To determine

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Answer 6

Chapter 13, Problem 6P

A

To determine

The effect on the market interest rate when the purchase price of capital increases:

An increase in the productivity of capital.

A shift in preference toward present consumption and away from future consumption.

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Answer 7

Chapter 13, Problem 6P

A

To determine

The effect on the market interest rate when the purchase price of capital increases:

An increase in the productivity of capital.

A shift in preference toward present consumption and away from future consumption.

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Answer 8

B

To determine

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Answer 9

B

To determine

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Answer 10

C

To determine

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Answer 11

C

To determine

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Answer 12

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Answer 13

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Ch. 13 - Prob. 1P Ch. 13 - Prob. 2P Ch. 13 - Prob. 3P Ch. 13 - Prob. 4P Ch. 13 - Prob. 5P Ch. 13 - Prob. 6P Ch. 13 - Prob. 7P Ch. 13 - Prob. 8P Ch. 13 - Prob. 9P Ch. 13 - Prob. 10P

Solution Summary: The author analyzes how the market of a loanable fund is similar to that of any good. An increase in the purchase price of capital will increase the demand for and supply of loans.

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Chapter 13 Solutions

Solution Summary: The author analyzes how the market of a loanable fund is similar to that of any good. An increase in the purchase price of capital will increase the demand for and supply of loans.

The effect on the market interest rate when productivity of capital increases: Concept Introduction: The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption Concept Introduction: The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

Chapter 13 Solutions

The effect on the market interest rate when productivity of capital increases:

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.

The effect on the market interest rate when there is a shift in preference toward present consumption and away from future consumption

Concept Introduction:

The market of the loanable fund is similar to the market of any good the price of the loanable fund is the interest rate.