Question

There is a firm that produces using the production function
*Y=A N - N ^{2}*, where

A. -2%

B. -1%

C. 1%

D. 2%

Answer #1

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Suppose that you have the following production function:
Y=9K0.5N0.5. With this production function the marginal product of
labor is MPN=4.5K0.5N-0.5 (hint: firms pay workers MPN so this
equals w). The capital stock is K=25. The labor supply curve is
NS=100[(1-t)]w]2 , where w is the real wage, t is the tax on
income, and hence (1-t)w is the after-tax real wage rate.
a) Graphically draw (a rough sketch is fine) of the labor market
and production function. Show graphically the...

A firm has a production function Y =
(K0.3)*(N0.7). Given this production
function, the marginal product of labor is given by
MPN
=0.7*(K0.3)*(N-0.3). Suppose that
the firm uses 1 unit of capital for production, that is, K = 1.
Additionally, suppose that the market wage is w = 0.35.
Questions:
a) Calculate the optimal number of workers the firm will
hire. Round your answer to the closest integer.
b) Suppose that the government subsidizes employment by
0.05 per worker (s...

1. Labor Market
Consider an economy with production function given by Y =
AK0.5L0.5 where A is the total factor productivity (TFP), K is the
capital stock and L is the labor input. For simplicity assume
capital is fixed and equal to 1. Assume A=150.
Write the firm’s problem of choosing labor demand. Derive the
demand for labor as a function of the real wage.
Assume labor supply is inelastic and fixed at L̄ = 100. Find the
equilibrium values...

The Hoosier economy has the production function:
Y = A F (K, N) = 6 (K) 0.5 (N) 0.5
The capital is K = 64, and the labor demanded is N
= 25;
the marginal product of labor is MPN =
3 K1/2/ N1/2
the marginal product of capital is MPK = 3 N1/2/
K1/2
What is the GDP?
What is the labor demand function?
What is the real
wage?
What is the total income to labor?...

The company Peach has the following production function:
Y= -2L^2 +32L (for L less than or equal to 8)
Show that MPL = 4(8-L)
Given the wages are $12, how many workers would the firm
hire?
Letting the market decide the wages, and given a labor supply
of L = 2 + ((1/2)w), how many workers would be hired, and at what
wage?
If the government imposes a minimum wage of $16, how much
unemployment would that create?
A virus...

Suppose the production function is Y=100(N-0.01N^2). And the
marginal product of labor is MPN=100-2N. The aggregate quantity of
labor supplied is NS=50+1.5w-Tr, where w is the real wage rate and
Tr = 20 is the lump-sum transfer that household received from the
government. The full-employment level of output is
less than or equal to 2,000
more than 2,000, but less than or equal to 2,500
more than 2,500, but less than or equal to 3,500
more than 3,500, but less...

Suppose the production function is Y=100(N-0.01N^2). And the
marginal product of labor is MPN=100-2N. The aggregate quantity of
labor supplied is NS=50+1.5w-Tr, where w is the real wage rate and
Tr = 20 is the lump-sum transfer that household received from the
government. The equilibrium real wage is
less than or equal to 10
more than 10, but less than or equal to 15
more than 15, but less than or equal to 20
more than 20, but less than...

A company’s production function is given by Y = A(40N –
N2 +100). Suppose the price of output is $6 per unit and A =1.
(Hint: you need to get MPN from the production function to solve
the questions below.)
What will be the demand for labor if the nominal wage is
$24?
What will be the demand for labor when the TFP is
increased such as A=2 (still assuming W=$24)?

Consider the following production function: Y = A ̄K2 L1 , where
Y is production, A ̄ is productivity, K is capital, and L is labor.
Let w denote the wage rate and r denote the rental rate of capital.
21 Suppose you solve the profit maximization problem of the firm:
max A ̄K L wL rK. What is K,L the expression for wL ? Y (a) wL =1↵.
Y (b) wL =↵. Y (c) wL = 1. Y3 (d)...

Table 18-12
The table displays data for a small, competitive,
profit-maximizing firm that produces and sells envelopes. The time
frame is one week.
Labor
L
Marginal Product of Labor
MPL
Wage
W
0 workers
134 boxes of envelopes
$600
1
106
$600
2
92
$600
3
84
$600
4
78
$600
5
Refer to Table 18-12. Suppose the firm sells
each box of envelopes that it produces for $7. Suppose also that
the firm’s fixed costs amount to $400. How...

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