n the specific factor model with two goods 1 and 2 and labour as the mobile factor, in the autarky equilibrium it must hold that A P1MPL1=P2MPL2 for marginal labour productivities MPL1 and MPL2 B MPL1=MPL2 for marginal labour productivities MPL1 and MPL2 C the wage w is given by w=MPL1/MPL2 D the wage w is given by w=P1/P2
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In the specific factor model with two goods 1 and 2 and labour as the mobile factor, in the autarky equilibrium it must hold that
| A |
P1MPL1=P2MPL2 for marginal labour productivities MPL1 and MPL2 |
|
| B |
MPL1=MPL2 for marginal labour productivities MPL1 and MPL2 |
|
| C |
the wage w is given by w=MPL1/MPL2 |
|
| D |
the wage w is given by w=P1/P2 |
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- Suppose that the owner of Boyer Construction is feeling the pinch of incrs associated with worker’s compensation and has decided to cut the wages of its two employees (Albert and Sid) from $25 per hour to $22 per hour. Assume that Albert and Sid view income and leisure as “goods,” that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Draw each worker’s opportunity set for each hourly wage. At the wage of $25 per hour, both Albert and Sid are observed to consume 12 hours of leisure (and, equivalently, supply 12 hours of labor). After wages were cut to $22, Albert consumes 10 hours of leisure and Sid consumes 14 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $22 per hour. How can you explain the seemingly contradictory result that the workers supply a different number of labor hours? (LO2, LO3, LO7)Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl a.Provide the functional form of the income effect from a marginal decrease in income and provide the functional form of the substitution and total income effects of a marginal increase in wage.Suppose that the owner of Boyer Construction is feeling the pinch of increased premiums associated with worker’s compensation and has decided to cut the wages of its two employees (Albert and Sid) from $25 per hour to $22 per hour. Assume that Albert and Sid view income and leisure as “goods,” that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Draw each worker’s opportunity set for each hourly wage. At the wage of $25 per hour, both Albert and Sid are observed to consume 12 hours of leisure (and, equivalently, supply 12 hours of labor). After wages were cut to $22, Albert consumes 10 hours of leisure and Sid consumes 14 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $22 per hour. How can you explain the seemingly contradictory result that the workers supply a different number of labor hours?
- Suppose that the owner of Boyer Construction is feeling the pinch of increased premiums associated with worker’s compensation and has decided to cut the wages of its two employees (Albert and Sid) from $25 per hour to $22 per hour. Assume that Albert and Sid view income and leisure as “goods,” that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Draw each worker’s opportunity set for each hourly wage. At the wage of $25 per hour, both Albert and Sid are observed to consume 12 hours of leisure (and, equivalently, supply 12 hours of labor). After wages were cut to $22, Albert consumes 10 hours of leisure and Sid consumes 14 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $22 per hour. How can you explain the seemingly contradictory result that the workers supply a different number of labor hours? (LO2, LO3, LO7)The HO model is based on four key relationships: between factor prices andcommodity prices, between goods prices and outputs, between goods prices and factor returns, and lastly between factor endowments and outputs.Clearly Explain.Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure U(c,l) = lnC + 4lnl 1) Provide the functional form of the income effect from a marginal decrease in income. 2) Provide the functional form of the substitution and total income effects of a marginal increase in wage. 3) Show that the Slutsky equation holds for this worker.
- Suppose that the owner of Boyer Construction is feeling the pinch of increased premiums associated with workers’ compensation and has decided to cut the wages of its two employees (Albert and Sid) from $23 per hour to $20 per hour. Assume that Albert and Sid view income and leisure as “goods,” that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Albert and Sid's opportunity set is presented below: "The horizontal axis labeled leisure hours ranges from 0 to 30 in increments of 5. The vertical axis is labeled income. A line begins at point A on the vertical axis goes down to the right and ends at the point (25, 0)." What is the value of A when the wage is $23? (Assume a 24-hour work day.) What is the value of A when the wage is $20? (Assume a 24-hour work day.) At the wage of $23 per hour, both Albert and Sid are observed to consume 13 hours of…Suppose the labor market is segmented into two distinct markets: the market for low-skill workers and the market for high-skill workers. Furthermore, suppose the competitive equilibrium wage in the low-skill market is $7.00/hour, while the competitive equilibrium wage in the high-skill market is $20.00/hour. If the minimum wage is set at $10.00/hour, which market will exhibit the greatest amount of unemployment? Demonstrate it graphically.Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl a) Compare worker 1 with worker 2 whose utility function is described by U(c,l) = cl. Which worker places a higher value on labour market work? b) Suppose the worker participates in the labour market. Derive worker’s compensated labor supply function and the compensated labour supply elasticity with respect to wage as a function of utility level and wage. c) Derive worker’s uncompensated labour supply function (for labour market participants and non-participants) and the uncompensated labour supply elasticity (for labor market participants) with respect to wage as a function of non-labour income and wage.
- a) Present the Lagrangian (constrained maximisation) problem for the household under this modified specification and derive the first order conditions in this case. Hint: the household chooses c1, c2, ℓ1 and ℓ2. b) Use the first order conditions for ℓ1 and ℓ2 to derive an expression for the relative amount of leisure time chosen by the household over the two periods, i.e. derive an expression for (1–ℓ1)/(1–ℓ2). Explain how an increase in the relative wage (w2/w1) affects the household’s decision about how much leisure to enjoy in each period. c) Calculate the intertemporal elasticity of substitution between period 1 and period 2 leisure time in this case. Explain how the magnitude of this elasticity influences the household’s decision-making in the model. d) Use the first order conditions for c1 and c2 to derive an expression for the relative amount of consumption chosen by the household over the two time periods, i.e. derive an expression for c2/c1. Provide an economic interpretation…Consider a consumer who could earn $400 per week and has 50 weeks available each year to allocate between work (H) and nonmarket time (L). They have no non-labour income. Their utility function is U = C2L , where C is the value of consumption goods. What is their optimal choice for the number of weeks in nonmarket time and consumption? Show this in a diagram. Suppose the government introduces a policy that (i) offers no benefits to people who do not work, (ii) offers a wage subsidy on earnings at a rate of 25%, with a maximum benefit of $5000, and (iii) the benefit is subject to reduction at a rate of 25% for every dollar earned above $20,000 in the year. Show the person’s new budget constraint in a new diagram, and discuss how the person’s optimal choice might change (you do not have to calculate this, but point to where it is likely on the new budget constraint). Discuss how income and substitution effects play a role.Assume that the labour market for mechanics is competitive and that it is differentiated into two groups: male and female. Assume that the mechanics in this market have vehicle repair ability regardless of whether they are male or female. Currently, the equilibrium wage in the female market is lower than in the male market. Further assume that the market for vehicle repair is competitive. If some consumers in the market for vehicle repair have a strong preference for having their vehicle repaired by a male mechanic, what will result? Question 34 options: The difference in wages will eventually disappear since vehicle repair is a homogeneous good. Mechanic shops that hire male mechanics will be able to charge a higher price for vehicle repair. Mechanic shops that hire female mechanics will be much more profitable. Mechanic shops that hire male mechanics will be much more profitable.