2 Suppose The Production Function In A Given Economy Is Given As Below Initially The Economy Has 400 Units Of Capital 1 (55.17 KiB) Viewed 17 times
2 Suppose The Production Function In A Given Economy Is Given As Below Initially The Economy Has 400 Units Of Capital 2 (54.09 KiB) Viewed 17 times
2 Suppose The Production Function In A Given Economy Is Given As Below Initially The Economy Has 400 Units Of Capital 3 (54.09 KiB) Viewed 17 times
2. Suppose the production function in a given economy is given as below. Initially, the economy has 400 units of capital and 400 units of labor. Given this, answer the following questions. Y = 8K 975 a. Derive the labor demand function for this economy as a function of the real wage and capital stock. b. Assuming factor prices adjust to maintain equilibrium, calculate the real wage, total output, and total amount earned by workers. I C. Assume the capital stock increased from 400 units to 625 units. Calculate the real wage, total output, and total amount earned by workers. d. Assume that instead of the capital stock increasing, Congress passes a minimum wage, set at 25% above the equilibrium wage you found in part b. Assuming all workers are part of the labor force, what is the unemployment rate resulting from this new wage? Calculate what happens to the level of output and the total amount earned by workers e. If Congress's goal in passing the minimum wage was to increase the welfare of the working class, has it succeeded in its goal? Defend your answer.
2. Suppose the production function in a given economy is given as below. Initially, the economy has 400 units of capital and 400 units of labor. Given this, answer the following questions. Y = 8KSUS a. Derive the labor demand function for this economy as a function of the real wage and capital stock. b. Assuming factor prices adjust to maintain equilibrium, calculate the real wage, total output, and total amount earned by workers. c. Assume the capital stock increased from 400 units to 625 units. Calculate the real wage, total output, and total amount earned by workers. d. Assume that instead of the capital stock increasing, Congress passes a minimum wage, set at 25% above the equilibrium wage you found in part b. Assuming all workers are part of the labor force, what is the unemployment rate resulting from this new wage? Calculate what happens to the level of output and the total amount earned by workers e. If Congress's goal in passing the minimum wage was to increase the welfare of the working class, has it succeeded in its goal? Defend your answer.
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!