Question 1

Suppose the marginal product of labor is MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 100 + 4w,where w is the real wage.The government imposes a minimum wage of 60.What is the quantity of employment?

Accepted Answer

To find the equilibrium quantity of employment, we need to set the marginal product of labor equal to the real wage. 
Thus, 200 - 0.5N = w = 60. 
Solving for N, we get: 
N = (200 - 60)/0.5 = 280. 
Therefore, the equilibrium quantity of employment is 280. Therefore, the best choice is option C.

Question 2

Over the past 100 years,what has happened to the average workweek in the U.S.manufacturing industry? Why has this occurred? What are the implications for the size of the income and substitution effects?

Accepted Answer

The answer of Over the past 100 years,what has happened...

Question 3

How would each of the following events affect Cheryl Shirker's supply of labor?
(a)Cheryl's firm announces a reorganization plan,in which she will get a big promotion and raise in six months.
(b)Cheryl's speculative investment in plutonium futures pays off big,netting her a profit of $300 thousand.
(c)Cheryl's father,who had planned to leave her a large bequest,must spend all his wealth on medical bills after a prolonged illness.

Accepted Answer

The answer of How would each of the following events...

Question 4

Suppose the marginal product of labor is MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium quantity of employment?

Accepted Answer

In equilibrium, the marginal product of labor (MPN) equals the real wage (w). Setting MPN equal to the wage and solving for N gives us the equilibrium quantity of employment. MPN = 200 - 0.5N = w. The supply of labor is 300 + 8w. Setting these equal to each other and solving for N gives us the equilibrium quantity of employment, which is 380.

Question 5

Suppose the marginal product of labor is MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium real wage?

Accepted Answer

To find the equilibrium real wage, we need to set the marginal product of labor equal to the real wage: 
200 - 0.5N = w 
Substituting the supply of labor equation into the above we have: 
200 - 0.5(300+8w) = w 
Solving for w, we get: 
w = 10 
Therefore, the equilibrium real wage is $10 (option B).

Question 6

Suppose the marginal product of labor is MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.If a supply shock increases the marginal product of labor by 10 (to MPN = 210 - 0.5 N),by how much does the real wage increase?

Accepted Answer

To find the change in real wage after the supply shock, we need to first find the level of employment where the new marginal product of labor equals the old level of employment supply.

210 - 0.5N = 300 + 8w

Subtracting 210 and 300 from both sides, and dividing by -0.5, we get:

N = -2(8w - 45)

Simplifying, we have:

N = 90 - 16w

To find the new real wage, we set the new level of employment equal to the old level of employment plus the supply shock:

300 + 8w' = 90 - 16w + 10

Simplifying, we get:

w' = w + 1

Therefore, the real wage increases by 1 after the supply shock. The correct answer is B.

Question 7

The equilibrium level of employment,achieved after the complete adjustment of wages and prices,is known as the

Accepted Answer

The equilibrium level of employment achieved after the complete adjustment of wages and prices is known as the full-employment level of employment. This is the level of employment where the economy is operating at its potential output with no cyclical unemployment.

Question 8

A sharp increase in stock prices makes people much wealthier.If the main effect of this increased wealth is felt on labor supply,what happens to current employment and the real wage rate?

Accepted Answer

When people feel wealthier due to a sharp increase in stock prices, they might choose to work less, reducing the labor supply. This decrease in labor supply would lead to a decrease in employment and, due to the scarcity of labor, an increase in the real wage rate.

Question 9

An adverse oil-price shock reduces labor demand.What happens to current employment and the real wage rate?

Accepted Answer

An adverse oil-price shock, which increases production costs, typically leads to a reduction in labor demand as firms try to cut costs. This reduction in labor demand would lead to both a decrease in employment and a decrease in the real wage rate, as the supply of labor exceeds demand.

Question 10

A tremendous flood along the Mississippi River destroys thousands of factories,reducing the nation's capital stock by 5%.What happens to current employment and the real wage rate?

Accepted Answer

The answer of A tremendous flood along the Mississippi River...

Question 11

Suppose the marginal product of labor in the economy is given by MPN = 0.002(16,000 - N),while the supply of labor is 1000 + 1000w.
(a)Find the market-clearing real wage rate and level of employment.
(b)What happens to the wage rate and employment if wealth rises,reducing the supply of labor to 500 + 1000w?
(c)What happens to the wage rate and employment if after wealth has risen as in part (b),there is a productivity shock that increases the marginal product of labor to MPN = 0.0025(16,000 - N)?

Accepted Answer

The answer of Suppose the marginal product of labor in...

Question 12

Suppose the marginal product of labor in the economy is given by MPN = 200 - 0.5 N,while the supply of labor is 100 + 4w.
(a)Find the market-clearing real wage rate.
(b)What happens if the government imposes a minimum wage of 40? Is there involuntary unemployment?
(c)What happens if the government imposes a minimum wage of 60? Is there involuntary unemployment?

Accepted Answer

The answer of Suppose the marginal product of labor in...

Question 13

Suppose the marginal product of labor is MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.If a supply shock increases the marginal product of labor by 10 (to MPN = 210 - 0.5 N),by how much does employment increase?

Accepted Answer

The answer of Suppose the marginal product of labor is...

Question 14

A bird flu epidemic causes many people to flee the country,but does not affect labor demand significantly because almost all the goods produced within the country are exported.What happens to current employment and the real wage rate?

Accepted Answer

Since the labor demand is not affected significantly, employment would not decrease much. However, many people have fled the country, so the labor supply would decrease. As a result, the real wage rate would increase. Therefore, the correct choice is D, employment would decrease and the real wage would increase.

Question 15

The government announces a tax increase on workers' wages to take effect in the future.What happens to current employment and the real wage rate?

Accepted Answer

If the government announces a tax increase on workers' wages, this means that workers will receive a lower net income because they pay a greater share of their income as taxes. This can lead to a decrease in demand for goods and services because workers will have less disposable income. As a result, there may be a decrease in employment since firms may reduce their output due to the lower demand. The reduction in demand may also lead to a decrease in the real wage rate as firms may lower wages to compensate for the lower demand. Therefore, the best choice is C where employment would increase but the real wage would decrease.

Question 16

A beneficial oil-price shock increases labor demand.What happens to current employment and the real wage rate?

Accepted Answer

A beneficial oil-price shock means that the price of oil has decreased, resulting in lower production costs for firms. This leads to increased labor demand, as firms can afford to hire more workers. As a result, current employment would increase. Additionally, with higher labor demand, firms may need to increase wages to attract and retain workers, leading to an increase in the real wage rate. Therefore, both employment and the real wage rate would increase.

Question 17

Full-employment output is the level of output that firms in the economy supply when

Accepted Answer

Full-employment output is the level of output at which firms in the economy supply goods and services when wages and prices have fully adjusted to market conditions. At this level of output, the economy is operating at full employment, which means there is no cyclical or demand-deficient unemployment. However, it is possible to have some level of frictional, structural or seasonal unemployment at full employment output, as those types of unemployment are not related to the business cycle or deficiency in aggregate demand. Choice A is incorrect because taxes have no direct impact on the level of output an economy can produce. Choice C is incorrect because full employment output does not imply zero unemployment rate, but rather that cyclical unemployment is absent. Choice D is incorrect because full employment output is not contingent on full utilization of capital, but rather on the full utilization of labor and other productive resources in the economy.

Question 18

In each of the following scenarios,state whether the labor supply curve would shift to the left,to the right,not shift at all,or if the shift is ambiguous because there is more than one effect and they would move the curve in opposite directions.
(a)The stock market rises sharply.
(b)Fewer teenagers work while in school than before.
(c)A large fraction of the population flees the country because of a bird flu epidemic.
(d)The expected future wage declines and the stock market crashes.
(e)The current real wage rate rises.

Accepted Answer

The answer of In each of the following scenarios,state whether...

Question 19

Suppose the marginal product of labor is MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 100 + 4w,where w is the real wage.The government imposes a minimum wage of 60.How much unemployment will this create among unskilled labor?

Accepted Answer

The answer of Suppose the marginal product of labor is...

Question 20

Suppose oil prices fall temporarily,as oil becomes more plentiful.What impact is this likely to have on the production function,the marginal products of labor and capital,labor demand,employment,and the real wage?

Accepted Answer

The answer of Suppose oil prices fall temporarily,as oil becomes...

Quiz 3: Productivity, output, and Employment

Suppose the marginal product of labor is MPN = 200 - 0.5N Where N is aggregate employment.The aggregate quantity of labor supplied is 100 + 4w,where w is the real wage.The government imposes a minimum wage of 60.What is the quantity of employment?

Over the past 100 years,what has happened to the average workweek in the U.S.manufacturing industry? Why has this occurred? What are the implications for the size of the income and substitution effects?

Suppose the marginal product of labor is MPN = 200 - 0.5N Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium quantity of employment?

Suppose the marginal product of labor is MPN = 200 - 0.5N Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium real wage?

Suppose the marginal product of labor is MPN = 200 - 0.5N Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.If a supply shock increases the marginal product of labor by 10 (to MPN = 210 - 0.5 N) ,by how much does the real wage increase?