Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971493
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 18, Problem 5PA
Subpart (a):
To determine
Wage rate.
Subpart (a):
Expert Solution
Explanation of Solution
Daily wage can be derived as follows.
Wage is
Rearrange the wage equation in terms of labor
Labor demand is
Subpart (b):
To determine
Calculate wage rate, profit and income.
Subpart (b):
Expert Solution
Explanation of Solution
Wage level with 200 labors can be calculated as follows.
Wage is 160.
Number of labor demanded by each firm can be calculated as follows.
Each firm employs 10 labors.
Profit can be calculated as follows.
Total profit for each firm is 200.
Total income can be calculated as follows.
Total income is $36,000.
Subpart (c):
To determine
Calculate wage rate and income.
Subpart (c):
Expert Solution
Explanation of Solution
New daily wage can be derived as follows.
Wage is
Rearrange the wage equation in terms of labor
Labor demand is
Wage level with 200 labors can be calculated as follows.
Wage is 320.
Profit can be calculated as follows.
Total profit for each firm is 400.
Total income can be calculated as follows.
Total income is $36,000.
Subpart (d):
To determine
Calculate profit and income.
Subpart (d):
Expert Solution
Explanation of Solution
Market demand function after the destruction can be derived as follows.
Labor demand is
Wage level with 200 labors can be calculated as follows.
Wage is 120.
Number of labor demanded by each firm can be calculated as follows.
Each firm employs 20 labors.
Profit can be calculated as follows.
Total profit for each firm is 800.
Total income can be calculated as follows.
Total income is $32,000. The total income decreased.
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[5 marks]
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[6 marks]
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(2)
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capital the firm should use.
[3 marks]
(b) Referring to your result from part (a), comment on what happens to K* when
each of the following variables change (holding other variables constant),
(i)
The measure of technology (A) falls
(ii)
The depreciation rate (8) increases
(iii)
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[2 marks]
[2 marks]
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Chapter 18 Solutions
Principles of Microeconomics (MindTap Course List)
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