-The people of Palm Island are willing to work 80 hours a day for a real wage rate of $4 an hour. Then each dollar increase in the real wage, they are willing to work 10 additional hours a day. Palm Island's production possibilities are in the table above.
a) Draw Palm Island's demand for labor curve.
b) Draw Palm Island's supply of labor curve.
c) What are the full-employment equilibrium real wage rate and quantity of labor in Palm Island's economy?
d) What is Palm Island's potential GDP?
Correct Answer:
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a) See the figure above. Palm Island's ...View Answer
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