ECON 3HH3 Lecture Notes - Lecture 1: Autarky, Marginal Product

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erinmanatee87

20 Mar 2018

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Home assignment #2: due to february 1, 2018. Show all your calculations and explain all your answers. Problems 1, 2 and 3 are based on chapter 3; problem 4 is based on chapter 4. Suppose that the wage is per hour in a two-sector (manufacturing and agriculture) specific-factors model. Suppose that capital is mobile between sectors but that there are two kinds of specific labor: skilled and unskilled. Suppose that land is specific to corn, capital is specific to automobiles, labor is mobile between sectors, and payments are as follows: Automobiles: sales revenue = 200; payments to labor = 100; payments to capital = 100. Corn: sales revenue = 100; payments to labor = 40; payments to land = 60. Holding the price of automobiles constant, suppose the increase in the price of corn is. 20% and the increase in the wage is 10%.

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4. Suppose that the wage is $20 per hour in a two-sector (manufacturing and agriculture) specific-factors model. Currently, the prices of manufactured and agricultural outputs are $5 and $1, respectively; the marginal product of labour in the manufactured sector is 6 units per hour, and the marginal product of labour in the agricultural sector is 10 units per hour. What will happen to the distribution of labour between the two sectors?

a. Nothing will happen. The current allocation of labour between the two sectors is ideal.

b. The manufacturing sector will demand more labour, and the agricultural sector will demand less labour at the current wage.

c. The agricultural sector will demand more labour, and the manufacturing sector will demand less labour at the current wage.

d. Both the agricultural and the manufacturing sector will demand more labour at the current wage.

chocolatecattle949

Suppose that the government gives a fixed subsidy of T per firm in one sector of the economy to encourage firms to hire more workers. What is the effect on the equilibrium wage, total employment, and employment in the covered and uncovered sectors if we assume to start that each of the two sectors - I and II - employs workers who are equally skilled, with each sector having a labor demand curve given by w = 12 - 0.1L (where L = the number of hours of labor) and with each sector initially facing a labor supply curve given by w = 0.1L? This will allow you to specify the initial equilibrium wage rates in each of the two sectors. Then assume that a government subsidy is given in the covered sector I of $2 per hour (while the other sector II gets no subsidy).

emeraldox281

Consider an economy that initially has
a labor force of 2000 workers. Of these workers, 1900 are employed and
each works 40 hours per week. Ten units of output are produced by each
hour of labor.

(b)
The economy enters a recession. Employment falls by 4% and the number of
hours per week worked by each employed worker falls by 2.5%.In
addition 0.2% of the labor force becomes discouraged at the prospect of
finding a job and leaves the labor force. Finally, suppose that whenever
total hours fall by 1%, total output falls by 1.4%. During the
recession, what is the size of the labor force? How many workers are
unemployed and what is the unemployment rate? What is the total output
per week in the economy? What is labor productivity per hour? What
is labor productivity per worker in a week?

apricotox870

ECON 3HH3 Lecture Notes - Lecture 1: Autarky, Marginal Product

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