Econ Lesson 3 HW

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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


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