7. LO 2, 4 Suppose that a consumer can earn ahigher wage rate for working overtime. That is,for the first q hours the consumer works, he orshe receives a real wage rate of w, and for hoursworked more than q he or she receives w, whereW2>W1. Suppose that the consumer pays notaxes and receives no nonwage income, and he orshe is free to choose hours of work.(a) Draw the consumer's budget constraint, andshow his or her optimal choice of consump-tion and leisure(b) Show that the consumer would never workhours, or anything very close to qExplain the intuition behind this.(c) Determine whathours.happens if the overtimewage rate w2 increases. Explain your resultsin terms of income and substitution effects.You must consider the case of a worker whoinitially works overtime, and a worker whoinitially does not work overtime.

Let the consumer has two goods to consume, consumption (C) and leisure (l). The consumer’s budget…

Answered: 7. LO 2, 4 Suppose that a consumer can…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Unemployment

Section: Chapter Questions

Problem 10PA

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Ma2. Required: Question 3.(LO3 Apply) Simon Ltd is run by Simon Leather who makes leather belts for designers. He uses the finest Argentinean leather and needs highly trained machinists to make the belts up to the quality designers expect. His beits usually sell for £50 per item and use 0.2m² of leather and 30 minutes of labor. Simon Ltd has 5 staff. They work a standard 8-hour day, 5 days a week, 48 weeks of the year. They earn £15 per hour. Leather costs £20 per meter. Simon also has some variable overheads of £6 per unit. Fixed overheads are £28,800. a) Calculate the number of belts Simon will have to sell to break even. Simon decides to branch out and start to also sell handbags to the same market. The handbags sell for €250 each and use 1.5m² of leather with 1 hour of labor being required. Variable overheads are £20 per handbag. There has been a bad case of foot and mouth in Argentina. Simon can only use the leather he has currently being shipped to him for the next…
. Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day. LO17.8 What is the current labor cost per car sold? Suppose that when the dealer raises the price of labor to $30 per hour the average number of cars sold by a salesperson increases to two per day. What is now the labor cost per car sold? By how much is it higher or lower than it was before? Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased? Suppose that if the wage is raised a second time to $40 per hour the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold? If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $20 per hour, $30 per hour, or $40 per hour?…
Assume that the labor demand equation for a fictional country is L d =30-w where w is the wage per hour worked and L d is the number of workers demanded by firms. Assume also that the labor supply equation for that country is L s =0.5(w) , where L s is the number of people willing to work . [LO 9.2,9.5] a. Find the equilibrium wage and quantity of labor employed b . At the equilibrium wage , how many people are unemployed ? c. How would the number of unemployed change if the supply of workers increased ?
Assume that the productivity of farm labour depends on daily caloric intake, similarly to that depicted in Figure17.4. Using this kind of diagram, compare the efficiency wages that would apply to the following two types of workers: • A landless labourer • A labourer with small plot of land on which he grows staple crops Describe the likely equilibrium unemployment rates and wage rates for landless labourers and small landholders. Judging partially on the basis of this example, what sorts of data and what empirical strategies might you use to see whether nutritional efficiency wages were an important element in the rural labour markets of poor, rural economies?
Table 9P - 2 uses data for the year 2016 , adjusted to be comparable to each other . All population values are in thousands . a . Fill in the bîanks in the table . [LO 9.1 ] b . In part a, you should have found that the unem ployment rates of the three countries differ significantly from one another . Suggest three possible reasons to explain why the countries might have different unemploym country working-age population labor force employed unemployed unemployment rate (%) labor-force participation rate (%) japan 110849 64460 2160 france 31164 3520 56.1 germany 76066 46096 5.7 ent rates .
Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm’s capacity. If he adds one more worker, the firm’s total monthly revenue will increase from $50,000 to $58,000. If he adds one more tractor, monthly revenue will increase from $50,000 to $62,000. Each additional worker costs $4,000 per month, while an additional tractor would also cost $4,000 per month. LO16.5 a. What is the marginal product of labor? The marginal product of capital? b. What is the ratio of the marginal product of labor to the price of labor (MPL/PL)? What is the ratio of the marginal product of capital to the price of capital (MPK/PK)? c. Is the firm using the least-costly combination of inputs? d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent?
Wealth, earnings, and disposable income are just three of several ways of looking at inequality. Imagine a household that earns $80,000 per year from labor. In that year, it also receives an income of $3,000 from investments, pays $12,000 in tax, and receives $7,000 in transfers from the state. Which of the following is its market income and its disposable income? O $83,000; $71,000. O $83,000 $78,000. O $80,000; $68,000. O $80,000; $75,000. J
Consider the following examples. For each one,say whether the incentive is positive or negative.[LO 1.3]a. Bosses who offer time-and-a-half for workingon national holidays.b. Mandatory minimum sentencing for drugoffenses.c. Fines for littering.d. Parents who offer their children extra allowance money for good grades.
Use Table 8P - 5 to calculate core and headline inflation in each time frame relative to the base year, assuming that each category is weighted equally in the calcula tion of headline inflation . [LO 8.2 , 8.4 a. 2012 to a base year . b . 2016 to a base year . . 2012 to 2016.
32. Suppose a person receives a 5% increase in pay when inflation is 4%. In this case, the nominal increase is__________ , the real increase is ____________, If the employee overestimates the real gain, this would be an example of___________. O. 9%, 4%, price confusion O. 5%, 1%, sticky wages O. 5%, 1%, employee misperceptions O. None of the other choices listed is correct. O. 5%, 4%, shoe leather costs 33. It is known that the method used by the BLS to calculate the U3 unemployment rate biases the results, All of the biases tend to cause the reported U3 statistic to be lower than what it really is. O. True O. False
As one of the largest and fastest-growing industries in 2018, health care provided how many jobs for wage and salary workers? O 18 million 30 million 3 pts O 24 million O 12 million
1. The absolute value of the slope of the consumption-leisure budget line is the after-tax wage, W. Suppose some workers (L1) earn W for up to 40 hours of work each week, and then earn 2W for any hours worked thereafter (called overtime). Other workers (L2) earn W for up to 40 hours of work each week, and then only earn 0.5W thereafter as working more than 40 hours requires getting a second job which pays an hourly wage less than their primary job. Both types of workers experience a “kink” in their consumption-leisure budget line. A. Refer to graph. Which one of the statements below describes the consumption-leisure budget line for L1 and L2 a. L2 budget line is CBT-40 b. L2 budget line is ABT c. L1 budget line is CBT d. L1 budget line is ABT B. Refer to graph. Which type of worker is likely to work up to the point of the kink? a. L1 b. L2 C. Refer yo graph. Which type of worker is likely to choose a consumption-leisure bundle far away from the kink a. L1 b. L2

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