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Answers to chapter 17 - Solutions to End-of-Chapter...

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Solutions to End-of-Chapter Exercises Chapter 17 [32] Section 17.1 [32.1]: The Demand for Labor 1.1 marginal product, price of output 1.2 marginal revenue product, wage 1.3 marginal revenue product 1.4 down arrow, down arrow, up arrow, up arrow 1.5 substitute labor for other inputs in the production process 1.6 flatter 1.7 Monthly income decreases from \$200 (\$2 x 100) to \$180 (\$3 x 60) 1.8 Incorrect because it ignores the output effect. An increase in the wage increases production cost and the price of air travel. The resulting decrease in the quantity of airline travel demanded will decrease the number of flights and pilots. Section 17.2 [32.2]: The Supply of Labor 2.1 up arrow, down arrow, up arrow 2.2 up arrow, up arrow, down arrow 2.3 income, substitution, opposite 2.4 30, 20, negatively 2.5 True 2.6 a. Initial income = \$1,000 = \$200 + \$20 x 40 hours. New income with 40 hours of work = \$1,000 = \$280 + \$18 x 40 b. There is no income effect because the initial choice of 40 hours generates the same income. The substitution effect will reduce her hours worked. 2.7

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Answers to chapter 17 - Solutions to End-of-Chapter...

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