Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 32, Problem 4.3P
To determine
The given statement “Full employment is maintained in an economy with reasonably flexible prices and wages”.
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Q1)
A prolonged and deep recession is called a........
Q2) labor demand curve A graph that illustrates the amount of ......... .that firms want to employ at each given wage rate
in an economy with production function Y = 1.5 × K^0.3L^0.7, K = 343, and L = 512. If factor markets are in equilibrium, then the rental price of capital is (approximately) ________, and the real wage is (approximately) ________. A) 0.5; 0.8 B) 7; 8 C) 0.9; 1.35 D) 1.4; 0.4 E) 0.6; 0.9
Assume that the marginal product of labor is given by the
following expression:
where L is measured in millions.
52.1
MPL =
L0.3
Determine the equilibrium real wage if the labor supply equals 100 million
workers .
Chapter 32 Solutions
Principles of Economics (12th Edition)
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- If the marginal product of labor is less than the nominal wage divided by the price of output, a firm that wishes to maximize profits will raise the real wage. hire more labor. maintain its current level of workers. Olay off workers.arrow_forwardRefer to the diagram to the right: Land is the other (fixed) factor of production. Currently the real wage is $30. Calculate the change in land rents due to a $5 increase in the real wage A Land rents = $(Enter your response rounded to the nearest dollar. Be sure to include the minus sign if necessary.) Calculate the change to the total wage bill (total payment to labor) A Total payment to labor$ (Enter your response rounded to the nearest dollar. Be sure to include the minus sign if necessary.) 60- 55- 50- 45- 40- 35- 30- 25- 20 15 10- 5- 0+ 0 Marginal product of labor, MPL Real Wage Real Wage MPL 10 20 30 40 50 60 70 80 90 100 110 Labor, Larrow_forwardQUESTION 1 For the production function Q = K0.5L0.3 and the budget 143 = 6K + 5L find the optimal employment of L. Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 = 1.2, 1.14 = 1.1).arrow_forward
- 3.1 Labor market equilibrium occurs at a real wage at which the quantity demanded for labor equals the quantity ................ of labor.arrow_forwardA 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):arrow_forwardIf Jimmy's Dairy, cheese producer, keeps hiring more workers for their production lines, the total production will keep rising at an increasing rate. keep rising at a decreasing rate. eventually peak then decrease. eventually peak then remain at the peak.arrow_forward
- Suppose a manufacturing firm currently employs 100 workers and the wage rate is $20 per hour. The firm's production function is given by Q = 10L^(1/2), where Q represents output and L represents the number of workers. Calculate the firm's current MPL .arrow_forwardWhat happens to employment in a competitive firm that experiences a technology shock such that at every level of employment its output is 200 units per hour greater than be fore?arrow_forward6. Plotting the supply of labor In Lexington, 90 people are willing to spend an hour working as pizza makers for an hourly wage of $10. For each additional $5 that the wage increases above $10, an additional 30 people are willing to spend an hour working. For hourly wages of $10, $15, $20, $25, and $30, plot the daily labor supply curve for pizza makers on the following graph. WAGE (Dollars per hour) 50 45 40 35 30 25 20 15 10 5 0 0 30 60 90 120 150 180 210 LABOR (Number of workers) 240 270 300 Supply ?arrow_forward
- 1. The marginal product of labor for a firm is defined by the following equation: MPN = A(100- N)" a. If the price of this firm's output is $2.00 and productivity is 1.0, what will be the firm's demand for labor if the nominal wage is $10. If the wage is $20? b. Repeat part a after doubling productivity.arrow_forwardConsider an economy with production function given by Y = AK0.5 10.5 where A is the total factor productivity (TFP), K is the capital stock and L is the labor input. For simplicity assume capital is fixed and equal to 1. Assume A=200. a. Write the firm's problem of choosing labor demand. Derive the demand for labor as a function of the real wage.arrow_forwardThe labour market in an economy is characterised by the following equations: W = 0.7-0.9u ре Wage setting: W = 0.5 P Price setting: In which W is nominal wages, pe and P are expected nominal prices and nominal prices, respectively, u is level of unemployment. Consider a linear production function for firms such that Q = N, i.e., production for firms (Q) depends only on the number of employees (N). Considering this information, which of the following statements are CORRECT: U The price mark-up (u) for this economy is 1 (i.e. µ = 1). O If actual output is below potential output, actual unemployment rate is below 0.22, (i.e. uț < 0.22). The equilibrium unemployment in this economy is 0.22 (i.e. ue = 0.22). U If wage setters become less responsive to changes in unemployment (e.g., from -0.9 to -0.7), the equilibrium unemployment decreases.arrow_forward
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