Answer3 - Homework 3 Answer key 15: BECEC 610: CDEAA 1115:...

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Unformatted text preview: Homework 3 Answer key 15: BECEC 610: CDEAA 1115: BCEBC 1620: CEBED 2123: AAD 24. a) Number of workers 1 2 3 4 5 b) Number of workers 1 2 3 4 5 Output (number of bikes) 10 18 24 28 30 Marginal product (number of bikes) 10 8 6 4 2 Value of marginal product (dollars) 300 240 180 120 60 Wage 300 200 150 100 50 25. Understanding the effects of supply and demand shifts on wages and employment: a) An increase in demand for the type of car made by the plant raises the car's relative price, which raises the value of the marginal product (VMP) of the plant's workers. The increase in the VMP raises the demand for plant workers and hence should increase their real wage and employment. b) The increase in gas prices lowers the demand for cars. The relative price of cars falls and hence the value of the workers' marginal product falls as well. Demand for workers therefore falls causing a decline in their real wage and employment. c) A decline in the supply of factory workers raises their real wage but reduces the number employed. 26. Understanding labor supply: a) An increase in the mandatory retirement age means that there will be more older people available to work, so the supply of labor is increases. b) An increase in productivity shifts up the demand for labor. The supply of labor is unaffected. The real wage and employment rise as the economy moves along the labor supply curve. 27. a. Unemployment rate = 30,000/600,000 = 5% b. LFPR = 600,000/1,000,000 = .60 or 60% ...
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