MACROECONOMICS >C< W/MYECONLAB
18th Edition
ISBN: 9781323886038
Author: Pearson
Publisher: Pearson Custom Publishing
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Chapter 17, 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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Students have asked these similar questions
True or false: Equilibrium employment is given by the intersection of the wage and the profit curves
Which of the following statements is correct regarding involuntary unemployment?
When there is no involuntary unemployment, firms must be employing workers without ever dismissing them.
When a firm sacks a worker against her wishes but she can get another job immediately, there is involuntary unemployment.
When there is involuntary unemployment, the employment rent is zero.
There must be involuntary unemployment in an efficiency wage equilibrium.
When hiring additional workers, a firm operating in a perfectly competitive labor market will
have to offer higher wages to hire additional workers, and the old workers will also receive the new, higher wage.
be able to hire additional workers at lower wages because the new workers have been unemployed.
be able to hire additional workers without offering higher wages.
have to offer higher wages to hire additional workers, but the old workers do not get the higher wage.
Chapter 17 Solutions
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- Suppose a firm’s hourly marginal product of labour is given by MPN = 0.2(200 − N), where N is the number of labour hours used in production. The amount of labour supplied by workers, NS, is given by NS = 100 + 5w, where w is the real wage. (a) Suppose the current real wage is equal to 20. How much labour will the firm want to hire? How much labour will the workers want to supply? Is there excess supply or excess demand of labour in the economy? Do you expect the real wage to go up or go down in this case? (b) Find the equation of the labour demand and calculate the equilibrium levels of real wage and full-employment. (c) If the government decides to tax the labour income, the equation of labour supply becomes NS = 100 + 5(1 − τ )w. Suppose τ = 40%. Repeat part (b). Compared to the results in (b), do the equilibrium levels of real wage and full-employment increase or decrease? Provide an intuitive explanation to your answers.arrow_forwardQ1) 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 ratearrow_forwardHow does an increase in the minimum wage affect employment in the short run according to conventional economic theory? A. Increases employment B. Decreases employment C. Has no effect on employment D. Depends on other factorsarrow_forward
- Which of the following statements correctly describes the demand for labor? A. The higher the real wage rate, the greater is the quantity of labor that firms find it profitable to hire because firms can hire higher-skilled labor at higher wage rates. B. The real wage rate influences the quantity of labor demanded because what matters to firms is how much output they must sell to earn the dollars they pay the workers. C. Each additional hour of labor hired produces more additional output than the previous hour. D. The demand for labor curve is downward sloping because hours per person increase as the real wage rate falls.arrow_forwardIf the Firm operates in a Perfectly Competitive Labor Market where the going market wage is $12, what is the profit-maximizing level of employment?If the Firm operates in a Perfectly Competitive Labor Market where the going market wage is $12, what is the profit-maximizing level of employment?arrow_forwardAssume workers in labour market M are qualified to work in an alternative competitive labour market N, and vice versa. What will happen to the wage rate and level of employment in market M if there is an increase in the demand for labour in market N?arrow_forward
- Explain in detail what will happen to the natural rate of unemployment and the real wage when firms decide to increase their markups.arrow_forwardQ33 In order to maximize profits, a firm needs to determine the quantity of each factor that it will employ, which is dictated by price as well as productivity of the factor. Assume farmer in the Ottawa area named Justin Trudeau has fixed amounts of land and capital and finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. Justin Trudeau product sells for $3 per unit, and the wage rate is $13 per worker. The marginal product of the second worker is Multiple Choice 32 14. 8 1 5arrow_forwardsuppose there is an adverse supply shock. It would a. Shift the production function up and decrease marginal products at every level of employment b. Shift the production function down and decrease marginal products at every level of employment c. Shift the production function up and increase marginal products at every level of employment d. Shift the production fun going down and increase marginal products at every level of employmentarrow_forward
- Determine how the following affect the slope of the output supply curve and explain your results. The inter-temporal substitution effect of the real interest rate on employment in the labor market increases.arrow_forwardExplain why there will always be some unemployment when the labour market is in equilibrium.arrow_forwardWith the Cobb-Douglass production function, the real wage will increase if: A. the supply of labor increases B. total factor productivity increases C. the price of output increases D. the amount of capital decreasesarrow_forward
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