Econ Lesson 3 HW
Determine the equilibrium real wage if the labor supply equals 80 million workers (L=80). The equilibrium real wage = w =
14
Suppose that total output is $10 trillion, total capital is $2 trillion, and total labor is $0.25 trillion. Total factor productivity is _____, and labor productivity is _____.
21.4; 40
Which element in the production function cannot be measured directly?
A
Mexico and Spain Example
A = Y/KL PCI = Y (converted to millions)/L
Which of the following is not a negative supply shock?
A decrease in population
Which of the following is not a positive supply shock?
An increase in capital equipment
Which are the two characteristics of the Cobb-Douglas production function that make it particularly useful to macroeconomists?
Constant returns to scale and diminishing marginal product
What is the rule firms follow to determine how much of each input to hire in order to maximize profits?
Firms demand a quantity of each factor of production factor up until the marginal product of that factor falls to its real factor price.
What relationship does the aggregate production function portray?
How much output is produced from given quantities of the factors of production.
Consider the production function written as Y = F(K, L). In the short run, which of the production function's variables are endogenous and which are exogenous?
K and L are exogenous and Y is endogenous.
The graph to the right represents the labor market of a given country. Assume the prevailing real wage is w1. Unemployment is equal to
L3-L2
Assume that the marginal product of labor is given by the following expression: MPL=52.1/L0.3 where L is measured in millions What is the marginal product of labor when L = 60 million?
MPL = 15
Which of the following is not a source of supply shocks?
Population explosions
The profit function for a firm can be written as
PxF(K,L)-RK-WL
The revenue of the firm is: cost is:
Revenue: PxF(K,L) Cost: (RK + WL)
What are supply shocks?
Shifts of the production function
Anthony currently earns $25 an hour and works 40 hours a week. When his boss offers to pay him $28 per hour, Anthony decides to accept the offer, but decides to keep working 40 hours. What is the effect of Anthony's decision on the labor supply curve?
The substitution and income effects offset each other completely.
Consider the effects of the Internet on frictional unemployment. How do you think websites that allow employees to search for job opportunities more efficiently have affected the job search?
They have likely lowered transaction costs of the job search and decreased frictional unemployment
How does total factor productivity differ from labor productivity?
Total factor productivity tells us how productive capital and labor are, whereas labor productivity tells us how productive labor is.
Cobb-Douglas production function: Y - A - K - L -
Y - output A - productivity K - capital L - labor
Let alpha = 0.3. How is the productivity variable measured?
Y/(K0.3L0.7)
over time, the natural rate of unemployment has
decreased - in part of increases in temporary work
Which of the following is not a likely reason preventing the labor market from clearing?
all of the above are likely reasons
Considering the graphic representation of the labor market, analyze the effect of technological advances that have increased workers' productivity in the last few decades (e.g., the Internet). What would be the effect on the real wage and employment if the supply curve does not shift?
both the real wage and the equilibrium quantity of labor have likely risen
the government could help with this problem by:
creating a training program that encourages or facilitates the acquisition of new skills
A negative supply shock, such as an oil price shock, would
decrease the equilibrium real wage
As the real wage rate increases, the quantity of labor demanded
falls because as the real wage increases it is less likely for the real wage to be less than the benefit received from hiring the worker
______ is more likely to have more significant labor benefits, such as more paid vacation and healthcare
france
Which of the following is not a possible cause of real wage rigidity?
high salaries
Suppose that a country is rapidly making the transition from an agricultural based economy to an economy in which most of GDP comes from the production of manufactures. Structural unemployment will likely
increase
Real wage growth can be explained primarily by
labor productivity growth
A leftward shift in the aggregate demand curve causes a _____________ the labor demand curve.
leftward shift of
An increase in workers' preferences toward leisure can cause a ___________ of the labor supply curve
leftward shift of
What should this firm do with respect to its employees and its use of equipment? The firm should_______ the number of employees and _____ its use of equipment
maintain, maintain
Decreases in the real wage cause a _______________ the labor supply curve.
movement to the left along
The natural rate of unemployment can be calculated with which of the following formulas?
natural rate of unemployment = actual rate of unemployment - cyclical unemployment
Diminishing marginal returns means that by adding an extra input
output increases, at a decreasing rate.
Structural unemployment occurs if
potential workers don't have the skills that firms currently need
Real wage rigidity occurs when
real wages cannot adjust to a level that equates the demand for and supply of labor
cyclical unemployment occurs most often during
recession
Frictional unemployment is best described as
temporary unemployment as workers look for a better job fit
The difference in per capita income between the two countries comes from
the differences in both capital per worker and the productive efficiency of the economy.
Suppose there is excess demand for labor. You can conclude that
the real wage will rise
natural rates of unemployment are higher in france than in the US. Suppose you are a recent college graduate and you are eager to find a job The labor market of ________ is likely to be more promising to you
the united states
Which of the following is not one of the three categories of employment status?
underemployed
discouraged workers move from
unemployment to not in the labor force
The quantity of labor supplied is positively related to the real wage rate because as the wage rises
workers are more likely to choose work over leisure
A manufacturer of toys is employing 50 workers and using 15 pieces of equipment to assemble toys. Currently, the marginal product of labor is $12 and the marginal product of capital is $20. Assume the market prices for labor and capital are $12 and $20, respectively. Is the firm maximizing profit?
yes