Final Exam Answers
4 points apiece.
12 points apiece.
Pace yourself, and good luck.
Suppose that the population of this country is 300 million.
Of these people, 75
million are not working, but only 25 million are considered unemployed.
labor force participation rate
Population = 300; Unemployed + Out of Labor Force = 75; Unemployed = 25.
LFPR = LF / P =
UR = U / LF = 25 / 250 =
The Swedish government previously allowed husbands and wives to take a
combined paternity and maternity leave of two years to take care of children.
Because wives often took the full two years from work and husbands took no time
off from work, this government changes the policy so that spouses must take off
equal time for childcare.
From the perspective of household production, does this
policy make sense?
Why or why not?
No, this is not sensible.
person model of household production predicts that it is never
optimal to have both household members splitting their time between working and household
childcare, in this case
Ned’s annual earnings are determined by the function
is the number of years of education he acquires after high school.
interest rate of 10
, how much education should he get?
He should keep going to school until the marginal rate of return on schooling equals the interest
of schooling, his earnings are
The percent change in earnings
for another year of school is 6,000/60,000 = 10
Briefly explain why wage growth declines throughout a worker’s career.
As age increases, the marginal return to investment falls.
As the marginal return to investment
falls, workers invest less.
Wage growth depends on the growth in human capital, so less
investment over time translates into slower wage growth over time.
of a change in an input price on the demands of a firm,
and briefly explain each effect.
as the price of one input falls, the firm substitutes toward using more of
that good and less of all substitutes.
as the price of one input falls, the marginal cost of production falls, so firms
increase their output.
In order to increase their output, they use more of all inputs.