Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 3, Problem 4RQ
To determine
Condition for a profit-maximizing level of employment.
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Explain the difference between nominal and real wages..
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.
Q33
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
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Chapter 3 Solutions
Macroeconomics
Ch. 3 - Prob. 1RQCh. 3 - Prob. 2RQCh. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Prob. 8RQCh. 3 - Prob. 9RQCh. 3 - Prob. 10RQ
Ch. 3 - Prob. 11RQCh. 3 - Prob. 12RQCh. 3 - Prob. 13RQCh. 3 - Prob. 14RQCh. 3 - Prob. 15RQCh. 3 - Prob. 1NPCh. 3 - Prob. 2NPCh. 3 - Prob. 3NPCh. 3 - Prob. 4NPCh. 3 - Prob. 5NPCh. 3 - Prob. 6NPCh. 3 - Prob. 7NPCh. 3 - Prob. 8NPCh. 3 - Prob. 9NPCh. 3 - Prob. 10NPCh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Prob. 4APCh. 3 - Prob. 5APCh. 3 - Prob. 6APCh. 3 - Prob. 7AP
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- Assess whether the following would be counted as unemployed in the Current Employment Statistics survey. A husband willingly stays home with children while his wife works. A manufacturing worker whose factory just closed down. A college student doing an unpaid summer internship. A retiree. Someone who has been out of work for two years but keeps looking for a job. Someone who has been out of work for two months but isnt looking for a job. Someone who hates her present job and is actively looking for another one. Someone who decides to take a part time job because she could not find a full time position.arrow_forwardHow will each of the following affect the current level of full employment output?Explaina) A large number of immigrants enter the country.b) Energy supplies become depleted.c) New teaching techniques improve the educational performance of high schoolseniorsd) A new law mandates the shutdown of some unsafe forms of capital.arrow_forwardSuppose that in an economy, the rate of job separation is 0.01 per month and the rate of job finding is 0.08 per month. Given these numbers, what is the natural rate of unemployment?arrow_forward
- Suppose a firm’s hourly marginal product of labor is given by MPN = A (200 – N) If A = 0.2 and the real wage rate is $10 per hour, how much labor will the firm want to hire? Suppose the real wage rate rises to $20 per hour. How much labor will the firm want to hire? With the real wage rate at $10 per hour, how much labor will the firm want to hire if A rises to 0.5?arrow_forwardSuppose that a country experiences a reduction in productivity – that is, an adverse shock to the production function.A) What happens to the labor demand curve? Show the change on the graph.B) How would this change in productivity affect the unemployment rate if the labor market is always in equilibrium?Explain your answer referring to the graph.arrow_forwardExplain the difference between the natural rate of unemployment and the actual rate of unemployment as reported by the US Department of Labor.arrow_forward
- How does the graph look for the effect of a temporary but persistent increase in total factor productivity on current employment. I know that the labour demand curve shifts outwards and the labour supply curve doesn't change but I don't know how to draw this.arrow_forwardIn 1954, Canadian Prime Minister Louis Stephen St. Laurent was paid a salary of $15 000. Stephen Harper, the Prime Minister in 2012, was paid $157 731. The price index for 1954 is 14.1 and the price index for 2012 is 121.7. What is, approximately, Prime Minister St. Laurent's salary equivalent in 2012 dollars? Help me.arrow_forwardQ35 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 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's product sells for $3 per unit, and the wage rate is $13 per worker. What is Justin Trudeau's profit-maximizing output? Multiple Choice 16. 40 37 20 32arrow_forward
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