Assignment 2

# Assignment 2 - situation 7 a 5 b 60 for 1 month and 40 for...

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Macroeconomics 314 Assignment 2 Numerical Problems: 2. a. The MPK is .2 units of output per unit of capital. No, the MPK stays constant. b. MPN from 100 – 110 = (Y1-Y0)/(N1-N0) = (.2(100+110^.5)-.2(100+100^.5))/(110-100) = .0098 MPN from 110 – 120 = (Y1-Y0)/(N1-N0) = (.2(100+120^.5)-.2(100+110^.5))/(120-110) = .0093 .0098 > .0093 so MPN diminishes 3. a. Number of Workers MPN

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0 NA 1 8 2 7 3 6 4 5 5 4 6 3 b. At \$38 it would hire 1 worker. At \$27 it would hire 3 workers. At \$22 it would hire 5 workers. c. d. Acme’s labor demand would increase from 1 to 5 workers, and its production would increase from 8 to 30 widgets. e. Acme’s labor demand would increase from 1 to 5 workers, and its production would increase from 8 to 30 widgets. f. They are identical, because MPRN increases the same amount in each
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Unformatted text preview: situation. 7. a. 5% b. 60% for 1 month and 40% for 6 months c. 3 months is average d. 80% Analytical Questions: 4. a. She would supply less labor due to the income effect related to her increased wealth. b. She would work more due to the substitution effect of a higher real wage. c. She would work less due to the substitution effect of a temporarily lower real wage. 5. This tax will decrease the demand for labor, increase unemployment, and lower the real wage. 6. Yes, the unemployment rate and the unemployment ratio can both rise during the same month. Yes, the participation rate can fall as the employment rate rises....
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## This note was uploaded on 05/06/2008 for the course ECON 3140 taught by Professor Mbiekop during the Fall '07 term at Cornell.

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Assignment 2 - situation 7 a 5 b 60 for 1 month and 40 for...

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