
Sub part (a):
Steady state level of output.
Sub part (a):

Explanation of Solution
The steady state level of output is calculated as follows:
The steady state level of output is 200 units.
Concept introduction:
Sub part (b):
Solow diagram to show short run impact.
Sub part (b):

Explanation of Solution
Figure 1 depicts Solow diagram which shows the short run impact of a 21% increase in the amount of labor available.
In figure 1, the horizontal axis represents the capital (K) and the vertical axis represents the output (Y). The initial production function
Concept introduction:
Economic growth: The economic growth is the increase in the overall goods and services produced per head in the economy over a specific period of time.
Solow growth rate The Solow growth rate is the rate of economic growth with given flexible price, and the existing real factors of capita, labor and knowledge. The Solow growth rate is an economy’s potential growth rate.
Sub part (c):
Steady state level of output.
Sub part (c):

Explanation of Solution
The new steady state level of output is calculated as follows:
The new steady state level of output is 220 units.
Concept introduction:
Economic growth: The economic growth is the increase in the overall goods and services produced per head in the economy over a specific period of time.
Sub part (d):
The new steady state level of output in the diagram.
Sub part (d):

Explanation of Solution
The new steady state level of output is 220 units which is depicted in the figure 1.
Sub part (e):
Action to gain long lasting benefits from the increase in capital stock.
Sub part (e):

Explanation of Solution
The initial production function is algebraically represented as follows:
Squaring both sides,
And solving for K, we get
Substitute K into the steady-state condition
And solve for Y by multiplying L and dividing by
Similarly, the new production function can be algebraically represented as follows:
Substitute K into the steady-state condition
And solve for Y by multiplying L and dividing by
Equating (1) in (2) we get
Substituting the values in equation (3) we get
Further, the percentage change in the output is depicted as follows:
This implies the steady-state level of output will grow by 21% per cent in the long run.
Concept introduction:
Production function: It is the relationship between the inputs employed by a firm and the maximum output the firm can produce with those inputs.
Sub part (f):
Output per worker.
Sub part (f):

Explanation of Solution
The output per worker in the initial steady state is calculated as follows:
The output per worker in the initial steady state is 2 units per labor.
The output per worker in the short run is calculated as follows:
The output per worker in short run is 1.82 units per labor.
The output per worker in the initial steady state is calculated as follows:
The output per worker in the long run is 2 units per labor.
Sub part (g):
New immigration policy and its effect.
Sub part (g):

Explanation of Solution
The citizens of the country are neither made worse off nor better off in the long run by a new immigration policy. This is because the new long-run level of output per worker compare with the initial level of output per worker remains unchanged which is 2 units per labor. This is unlike the short run effect which has lower output per worker. In the long run, the steady output level is determined largely by the
Concept introduction:
Depreciation: Depreciation is the process of decreasing the value of an asset over time especially due to wear and tear.
Investment: The investment is the money invests in terms of assets and building by the individual for the future consumption and profit making.
Sub part (h):
New steady state level of capital.
Sub part (h):

Explanation of Solution
The new steady state level of capital is calculated as follows
We know
Also
Equating all these we get,
Substituting the values we get
Thus the new steady state level of capital is 484, so that
Want to see more full solutions like this?
Chapter 8 Solutions
EBK MODERN PRINCIPLES OF MICROECONOMICS
- Using the graph on the right, determine the per unit prices of capital and labour. 20- Given the information provided about the isocost lines, we know that the per unit price of capital is TC=$100 and the per unit price of labour is 16- TC $80 ○ A. $50; $20 ○ B. $2; $5 ○ C. $5; $2 ○ D. $20; $50 E. not determinable; not determinable Quantity of K 12 TC $60 TC $40 0 10 20 30 Quantity of L 40arrow_forwardThe diagram to the right contains isocost lines A and B. If the price of capital is the same for both lines, then the difference between isocost line A and isocost line B is that OA. the total cost is larger along B. B. the level of output is lower along A. C. both capital and labour are cheaper along A. OD. labour is more expensive along A. ○ E. labour is more expensive along B. Capital Labourarrow_forwardFor the firm whose cost curves are shown at right, the minimum efficient scale is ○ A. between 60 and 140 units of production. OB. about 20 units of production. OC. about 60 units of production. OD. about 100 units of production. OE. the level of fixed cost corresponding to SRATC2. SRATC₁ LRAC SRATC4 SRATC₂ SRATC3 เนด เad iso C 20 20 40 60 80 100 120 140 160 180 200 Output per Periodarrow_forward
- SRATC₂ SRATC3 In the figure, increasing long-run average total costs for the firm are confined to the output range OA. where the LRAC curve is downward sloping. B. above 80 units of output. O C. above 50 units of output. OD. between 50 and 80 units of output. SRATC₁ OE. between 10 and 100 units of output. ---- SRATC LRAC 10 20 30 40 50 60 70 80 90 100 Output per Periodarrow_forwardFor the firm whose cost curves are shown at right, the minimum efficient scale is OA. between 10 and 50 units of production. OB. about 80 units of production. O C. the level of fixed cost corresponding to SRATC₁. OD. about 10 units of production. ○ E. about 50 units of production. Cost per Unit SRATC₁ LRAC SRATC2 SRATC4 SRATC3 10 20 30 40 50 60 70 80 Output per Period 90 100arrow_forward• 3 different people working at any companies under the BPO industry in the Philippines. • What are the 3 different Vision, Mission, Duties and Responsibilities and Career Path of these people in their companies under the BPO industry?arrow_forward
- Module 6 ⚫(1902) Buckner C X | (1902) How to d x (1902) Buckner F X (1902) Productic X WP Videoplayer Canvas Login | Ir x | + Σ R mybrcc.instructure.com/courses/417310/discussion_topics/3420114?module_item_id=20155705 Spring 2025 Home Announcements Modules Syllabus Grades 8 People BRCC-_Library DLASC Module 6 Discussion - Business Costs Relaunch to update For this discussion, think about where you work or a business you have a significant amount of knowledge about. What is a common product that the business sells? What are the main costs the business has to incur in order to be able to sell that product? Which of these costs are fixed and which are variable? How much additional costs would be incurred if it were to sell one additional unit of that product (marginal cost)? Write a discussion thread about this business, the product it commonly sells, and your answers to the above questions. Also, respond to at least two threads created by your classmates. In these responses, share what…arrow_forwardRefer to the video to answer the following: • what are all the key policies or all the strategies the Philippine government should prioritize to accelerate sustainable economic growth? • these should consider the Philippines current economic challenges, including inflation, unemployment, and the need for digital transformation. "The Philippines' Strong Economic Growth" (YouTube link: https://youtu.be/1YtEoGp2ZeM?siJQfIv5kbu0txVsLL.)arrow_forwardsolve about this qarrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education





