homework2spring2005

homework2spring2005 - Economics 302 Spring 2005 Homework #2...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 302 Spring 2005 Homework #2 Due February 16, 2005 1. Your liberal-activist roommate is plotting to bring down capitalist society. He/she claims that workers are being cheated out of compensation that is rightly theirs. He/she points to sizable profit announcements by large corporations as evidence that workers should be paid more. You decide (unwisely) to debate the issue from the standpoint of an academic economist. a. What common misconception about profit should you point out in your opening statement? b. Explain how economists believe that wages are determined. c. Show how if the aggregate production function is homogeneous of degree one (which is a reasonable long run assumption) that economic profit is zero rendering your roommate’s argument based upon profit weak. Be thorough in your explanation since your roommate is not easily convinced. 2. Suppose that the economy’s output is fixed by the amount of labor and capital present, the government balances its budget, the m.p.c. is 0.9 and NX=0. Suppose
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

homework2spring2005 - Economics 302 Spring 2005 Homework #2...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online