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Homework answers / question archive / 1) Wage-setting curve Wage-setting curve (New) Labour productivity Real wage, Real Profit Price-setting curve M B Price-setting curve (New) 0 Employment, N (Lower unemployment →) (10 points) Use the figure above to answer this question
1) Wage-setting curve Wage-setting curve (New) Labour productivity Real wage, Real Profit Price-setting curve M B Price-setting curve (New) 0 Employment, N (Lower unemployment →)
(10 points) Use the figure above to answer this question. Indicate whether the following statements are true or false. You will not be given any credit unless you present an explanation for the false statement a. It does not make any difference for the workers between point A and point C because the rate of unemployment is the same (5 pts) b. Labor productivity line will shift up and the real wage will be lower as a result of better technology(5 pts)
2.Markup, u B A Long-run Equilibrium markup, u" C Profit-maximizing mark-up Number of firms, n 20 Equilibrium number of firms
(12 points) The downward sloping line in the graph below gives the markup that maximizes the firm's profits, for a given number of firms. The number of firms is constant and equal to 20 at the long-run equilibrium markup, u*. a. What does the markup u show us? (3 pts) b. Is the number of firms at C greater or less than the equilibrium number of firms? (2 pts) c. Why do you think that the number of firms at B is not sustainable (i.e. the number of firms will change)? d. What will happen to the long-run equilibrium markup if there is an increase in opportunity cost of capital (i.e. higher long- term interest rate)? Explain your answer.(3 pts)
3. Consider an economy with a production function Y = KΘ(AN)1-Θ with Θ = .5 and A = 4K/N. Suppose it has a saving rate of .1, a population growth rate of .02, and a depreciation rate of .03.
a. Write the production in the form y = ak.
b. What are the growth rates of y and k? dy/y = ________ dk/k = ________
c. Now suppose the saving rate increases to .2 ceteris paribus. What are the growth rates of y and k? What affect does an increase in the saving rate have on the rate of economic growth? dy/y = ________ dk/k = ________
An increase in the saving rate will cause the rate of growth of per capita output to circle: (increase/decrease).
d. Now suppose with the saving rate again equal to .1 that the rate of population growth increases to .05 ceteris paribus. What are the growth rates of y and k? What affect does an increase in the rate of population growth have on the rate of economic growth? dy/y = ________ dk/k = ________
An increase in the rate of population growth will cause the rate of growth of per capita output to circle: (increase/decrease).
4.In a closed economy, Ann can produce either 7 kg Fish or 4.2 kg Mushroom per day. Bruce can produce either 6 kg Fish or 15 kg Mushroom per day. Which of the following points is NOT on their joint production possibility curve?
(In the form of [Answer01] kg of Fish and [Answer02] kg of Mushroom.)
Select one:
a. 3.50, 17.10
b. 13.00, 0
c. 7, 15.00
d. 9.00, 7.50
2/ In a closed economy, Ann and Bruce shall make their production and consumption decisions together. Ann can produce either 7 kg Fish or 4.2 kg Mushroom per day. Bruce can produce either 6 kg Fish or 15 kg Mushroom per day. Suppose they decide to consume the two goods at a ratio of 1:1. Ann and Bruce will consume a total of [Answer] kg Fish per day.
(In decimal numbers, with two decimal places, please.)
3/
In a closed economy, Ann and Bruce shall make their production and consumption decisions together. Ann can produce either 7 kg Fish or 4.2 kg Mushroom per day. Bruce can produce either 6 kg Fish or 15 kg Mushroom per day. Suppose now they decide to consume Fish and Mushroom at a ratio of 2:1. Ann and Bruce will consume [Answer] kg Fish per day.
(In decimal numbers, with two decimal places, please.)
4/
In Islandia, a small economy, Jack and Jill shall make their production and consumption decisions together. Jack can produce either 8 kg banana or 12 kg tea per day. Jill can produce either 10 kg banana or 23 kg tea per day. Suppose now they are open to trade with the rest of the world. The price of banana is $2/kg and the price of tea is $1/kg in the world market. Suppose Islandia is small enough that its behavior will not affect the world prices.
Jack and Jill will produce a total of [Answer] kg banana per day.
(In decimal numbers, with two decimal places, please.)
5/
In Islandia, a small economy, Jack and Jill shall make their production and consumption decisions together. Jack can produce either 8 kg banana or 12 kg tea per day. Jill can produce either 10 kg banana or 23 kg tea per day. Suppose now they are open to trade with the rest of the world. The price of banana is $2/kg and the price of tea is $1/kg in the world market. Suppose Islandia is small enough that its behavior will not affect the world prices.
If they are going to consume 7 kg banana, then, they will end up consuming a total of [Answer] kg tea.
(In decimal numbers, with two decimal places, please.)
6/
In Islandia, a small economy, Jack and Jill shall make their production and consumption decisions together. Jack can produce either 8 kg banana or 12 kg tea per day. Jill can produce either 10 kg banana or 23 kg tea per day. Suppose now they are open to trade with the rest of the world. The price of banana is $3.5/kg and the price of tea is still $1/kg in the world market. Suppose Islandia is small enough that its behavior will not affect the world prices.
Jack and Jill will produce a total of [Answer] kg banana per day.
Please use this google drive link to download the answer file.
answer 1.https://drive.google.com/file/d/1WPrfiYWlmEgTMFXamYbiJ4HAxMwKc5zL/view?usp=sharing
answer 3.https://drive.google.com/file/d/1BbHBZ88ztpQQddGx9vTSOVZ2HXoPnWKz/view?usp=sharing
answer 4.https://drive.google.com/file/d/1zIZph99Z0uddEg3XiTiefopBAybFzp2w/view?usp=sharing
Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process.
https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link
2. The markup µ shows the amount the firsm earn over their marginal cost of production as a percentage of their total marginal cost. Since the firms are rational producers they set the price of product over the marginal cost in order to earn profits on the production of goods.
As it can be seen from the downward sloping line, the markup which maximizes a firm's profit falls as the equilibrium number of firms rise. This is because when there are a large number of firms the consumer demand gets segregated between different firms as a result of which each firm's share in catering to demand falls and subsequently the markup earned also falls.
Hence, the markup shows us the amount firms are earning over their marginal cost of production as a percentage of their total marginal cost.
b. The equilibrium number of firms are 20 and the number of firms at C is greater than the equilibrium number of firms. Corresponding to point C, the number of firms are higher and the markup is lower as compared to the equilibrium
c. Yes, the number of firms at B is not sustainable and the number of firms will change. The underlying reason behind this is that at point B the markup is higher then the equilibrium level of markup. When the existing firms at point B are earning higher then the equilibrium markup, other firms will find it lucrative and enter the market with the aim of earning a higher markup then the equilibrium. When the number of firms rise, the supply will rise and for a given demand, the price level will fall. As a result of fall in price level, the markup also falls.
Hence, the number of firms at B is not sustainable.
d. A higher long term interest rate will effect the cost of production as it implies that firms will incur more cost on capital which will ultimately raise the cost in which the output is being produced. Hence, firms will earn lower markup in long run and the equilibrium level of markup will fall below µ*
4. As shown in the diagram below we have production possiblity frontier for both Ann and Bruce.
Fig-ii reflects their joint production possiblity frontier which is obtained by summing their indivisual production possibility frontier.
As it can be seen maximum quantity of Mushroom they can produce jointly is 19.2 kg and maximum quantity of fish thy can produce jointly is 13kg.
Of all the points given in the options point a i.e 3.5 kg fish and 17.1 kg mushroom will not be on the joint production possibility curve.
