Econ 1A Practice Problems #4

Econ 1A Practice Problems #4

1. Consider the following production function.

 

Labor               Output                         Marginal Product

 

1,000               300,000

2,000               500,000

3,000               650,000

4,000               750,000

5,000               800,000

6,000               825,000

7,000               835,000

1. Find the marginal product of labor and enter in the table.

1. Suppose that labor supply equals 6,000. What will be the equilibrium real wage?

_______________

 

1. What will be the economy’s aggregate supply?

_______________

 

1. Draw diagrams of the production function and labor market.

 

1. Show the effects of a decrease in labor supply to 5,000.

1. Show the effect of a ten percent upward shift in the production function.

2. Consider the following production function.

 

Labor               Output                         Marginal Product

0                      0

1,000               700,000

2,000               1,200,000

3,000               1,500,000

4,000               1,600,000

5,000               1,600,000

6,000               1,500,000

 

 

1. Find the marginal product of labor and enter in the table.

 

1. Suppose that labor supply equals 3,000. What will be the equilibrium real wage?

 

_______________

 

1. What will be the economy’s potential GDP?

_______________

 

1. Draw diagrams of the production function and labor market and label the appropriate curves. Also, show the equilibrium values in this problem.

 

1. Show the effects of an increase in labor supply to 5,000.

 

1. Show the effects of a twenty percent upward shift in the production function.

 

 

3. Suppose that the labor force equals 100 million, the job finding rate is one-fourth and the job loss rate is .03.

 

1. What is the equilibrium unemployment rate?

 

1. How many people are unemployed in equilibrium?

 

1. How many are employed?

 

4. Suppose that the labor force of low-wage workers is 20 million and the demand is as given below.

 

Wage               Jobs

$20                  6 million

$18                  8

$16                  10

$14                  12

$12                  14

$10                  16

$8                    18

$7                    20

$6                    22

$5                    24

 

1. What is the equilibrium wage level and number of jobs? Draw a diagram.

1. If a minimum wage of $6 is imposed what is the new wage and number of jobs? Is there any unemployment?  How much?  Draw a diagram.

1. If a minimum wage of $10 is imposed, what is the new wage and number of jobs? Is there any unemployment?  How much?  Draw a diagram.