soln2.6th - exactly equals the real wage at the quantity of...

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Problem Set #2 Solutions 3.1 Year Y K N 196 0 250 2 2695 65.8 197 0 377 2 4044 78.7 198 0 516 2 5831 99.3 199 0 711 3 7809 118.8 200 0 981 7 1039 2 136.9 a.) = 7 . 0 3 . 0 N K Y A Solution for A's: Year Y K N A 196 0 250 2 2695 65.8 12.484 197 0 377 2 4044 78.7 14.701 198 0 516 2 5831 99.3 15.319 199 0 711 3 7809 118. 8 17.057 200 0 981 7 1039 2 136. 9 19.565 Solution for A/A's Year Y K N A A/A 196 0 250 2 2695 65.8 12.48 4 - 197 0 377 2 4044 78.7 14.70 1 17.76% 198 0 516 2 5831 99.3 15.31 9 4.20% 199 0 711 3 7809 118. 8 17.05 7 11.35% 200 0 981 7 1039 2 136. 9 19.56 5 14.71%
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b.) Calculate the marginal product of labor by seeing what happens to output when you add 1.0 to N Year Y 1 Y 2 MPN 196 0 250 2 2528. 6 26.6 197 0 377 2 3805. 5 33.5 198 0 516 2 5198. 3 36.3 199 0 711 3 7154. 9 41.9 200 0 981 7 9867. 1 50.1 2
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3.4 ) N 100 ( A MPN - = a.) Labor Demand is derived from the requirement that the marginal product of labor
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Unformatted text preview: exactly equals the real wage at the quantity of labor demanded. Therefore: A W/P-100 ND : or ), ND 100 ( A P W w =-= = When P = $2, A = 1.0, and W = $10: 95 . 1 2 $ / 10 $ 100 ND =-= . When P = $2, A = 1.0, and W = $20: 90 . 1 2 $ / 20 $ 100 ND =-= . ND = 100 - W/P. W/P N 100 100 ND ND = 95 at w = 5. Therefore, w = 5 is the equilibrium real wage. 3 b.) For A = 2.0: 2 P / W 100 ND-= W/P N 200 100 ND ND = 95 at w =10. Therefore w = 10 is the equilibrium real wage. 4...
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soln2.6th - exactly equals the real wage at the quantity of...

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