Problem_Set2+2009

Problem_Set2+2009 - Economics 1B-Fall 2009 Assignment #2...

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Assignment #2 Part I 1. Suppose that for the country as a whole, the supply of labor is not sensitive to the real wage. However, for a small state within the country, the supply of labor will be very sensitive to the wage offered in that state. a. Explain why that the sensitivity of the supply of labor differs between the country as a whole and a small state. b. Suppose this state wanted to pay for the uninsured by levying a payroll tax on firms. Compare the effects of a payroll tax levied: 1. for the entire country 2. by the individual state Explain the logic of your result. 2. Using the full employment model in Chapter 7 and 8, draw graphs to show the effects of employment and real wages of the following: 1. An increase in Social Security payments for the elderly which reduces their labor supply. 2. An adverse shock to technology. 3. An increase in immigration 4. A subsidy provided to firms for each worker they hire. 3.
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Problem_Set2+2009 - Economics 1B-Fall 2009 Assignment #2...

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