MICROECONOMICS (LL) W/CONNECT 21ED
21st Edition
ISBN: 9781260361285
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 23, Problem 1RQ
To determine
Relation between the Gini ratio and the distribution of income.
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Suppose a worker’s skill is captured by his efficiency units of labor. The distribution of efficiency units in the population is such that worker 1 has one efficiency unit, worker 2 has two efficiency units, and so on. There are 100 workers in the population. In deciding whether to migrate to the United States, these workers compare their weekly earnings at home ( w0) with their potential earnings in the United States (w1).The wage-skills relationship in each of the two countries is given byw0 = 700 + 0.5sandw1 = 670 + swhere s is the number of efficiency units the worker possesses.a. Assume there are no migration costs. What is the average number of efficiency units among immigrants? Is the immigrant flow positively or negatively selected?b. Suppose it costs $10 to migrate to the United States. What is the average number of efficiency units among immigrants? Is the immigrant flow positively or negatively selected?
Given: Assume South Korea grows at 4% and United States grows at 1 %
assume they both start from the same fictional income level, $10,000.
(1) What will the incomes of the US and South Korea be in 20 years?
(2) By how many multiples will each country's income grow in 20 years?
Suppose that the current (first) generation consists of 1 million people, half of whom are women. Assume the total fertility rate is 1.2 and the only way people die is of old age.
Instructions: In part a, enter your answer as a whole number. In parts b and c, round your answers to 2 decimal places.
a. How big will the fourth generation (the great-grandchildren) be?
___ people
b. How much smaller (in percentage terms) is each generation than the previous generation?
___ percent
c. How much smaller (in percentage terms) is the fourth generation than the first generation?
___ percent
Chapter 23 Solutions
MICROECONOMICS (LL) W/CONNECT 21ED
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- Assume there are two countries: South Korea and the United States. South Korea grows at 4 and the United States grows at 1. For the sake of simplicity, assume they both start from the same fictional income level, 10,000. What will the incomes of the United States and South Korea he in 20 years? By how many multiples will each countrys income grow in 20 years?arrow_forwardAs 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 millionarrow_forwardHow is absolute poverty measured, in comparison to the distribution of national income? Write down a statistic for each measurement. List 3 countries in Latin America with extremely high rates of absolute poverty and 3 countries with very high income inequality. What are 2 factors which may have increased absolute poverty rates throughout the region’s history? Finally, provide 2 factors which have increased income inequality in Latin America throughout its history.arrow_forward
- Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. What percentage of total income is received by the highest 60 percent of the income receivers in population A? Multiple Choice O O O O 87.5 25 60 76.5 < Prev 5 of 10 www www www Nearrow_forwardassume there are two types of workers, low- and high-ability, and let 0 = 0.25 be the proportion of high-ability workers in the population. Assume their marginal productivity and, therefore, their wages are wh = $20 and wl = $16, and that both types can use college education to signal high ability. The cost of college education for low-ability workers is cl = $5 whereas the cost for high-ability workers is ch = $2. How much do firms pay to each worker type when they cannot differentiate them? (a) wh = $20 and wl = $16 (b) wh = $2 and wl = $5 (c) w = $17 (d) w = $18arrow_forwardUrgently need. What does the two gap model of poverty trap say? Poverty arises when the rate of return on capital exceeds the growth rate of income. Poverty arises from the gap between savings and investment and can be remedied by foreign aid. Poverty arises when capital market imperfections restrict the amount individuals can borrow. Poverty arises when a country invests in the traditional sector with constant returns to scale, and not in the modern sector with increasing returns.arrow_forward
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