Hw2 - Sonoma State University Department of Economics...

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Sonoma State University ECONOMICS 304 Department of Economics Florence Bouvet Assignment 2 Due Date: September 15 th at the beginning of lecture 1) Consider the following production function: Y = 40 K 0.2 L 0.8 , where Y represents output, K represent capital, and L represents labor. a) Does this production function exhibit constant, decreasing or increasing returns to scale? Show your work. b) Compute expressions for the marginal products of labor and of capital. Does the production function exhibit increasing, constant or decreasing returns to labor? Show your work.
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c) Do workers or capitalists (owners of capital) end up getting paid the larger share of total output? What fraction of total output gets paid to workers? d) Suppose that an increase in immigration into the U.S. increases the U.S. labor force. Discuss the effect on the real wage and the real rental price of capital. Would workers currently in the U.S. be happy about the immigration? How about the owners of U.S. factories?
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2) Please read the Washington Post article “Effect of immigration on jobs, wages is difficult for economists to nail down” (see below), and answer the following questions: a) Besides immigration, what other factors explain the slowdown in wage growth for native unskilled workers in the US? b) List and explain two positive macroeconomic effects of immigration on the US economy. Effect of Immigration on Jobs, Wages Is Difficult for Economists to Nail Down By Nell Henderson Washington Post Staff Writer Saturday, April 15, 2006; D01 According to the economic models, it's a no-brainer: a surge of low-skilled immigrants should increase the supply of such workers, driving down wages at the expense of working-class Americans.
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Sen. Byron L. Dorgan (D-N.D.), explaining why he opposes legislation to allow more legal immigration, said recently: "I don't think you need a professor to understand that when you import substantial cheap labor, it displaces American workers." But recent research suggests that the economic impact of immigration is not so simple. The effects are difficult to disentangle from other factors that have dampened wage
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This note was uploaded on 03/08/2011 for the course ECON 304 taught by Professor Eyler during the Spring '07 term at Sonoma.

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Hw2 - Sonoma State University Department of Economics...

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