Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 32, Problem 4.3P
To determine
The given statement “Full employment is maintained in an economy with reasonably flexible prices and wages”.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Q1)
A prolonged and deep recession is called a........
Q2) labor demand curve A graph that illustrates the amount of ......... .that firms want to employ at each given wage rate
Describe the two possible effects that an increase in
the wage rate can have on labor supply. Which effect
do you expect to dominate under normal
circumstances?
Suppose that a country experiences a reduction in productivity – that is, an adverse shock to the production function.A) What happens to the labor demand curve? Show the change on the graph.B) How would this change in productivity affect the unemployment rate if the labor market is always in equilibrium?Explain your answer referring to the graph.
Chapter 32 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- Suppose a firm’s hourly marginal product of labour is given by MPN = 0.2(200 − N), where N is the number of labour hours used in production. The amount of labour supplied by workers, NS, is given by NS = 100 + 5w, where w is the real wage. (a) Suppose the current real wage is equal to 20. How much labour will the firm want to hire? How much labour will the workers want to supply? Is there excess supply or excess demand of labour in the economy? Do you expect the real wage to go up or go down in this case? (b) Find the equation of the labour demand and calculate the equilibrium levels of real wage and full-employment. (c) If the government decides to tax the labour income, the equation of labour supply becomes NS = 100 + 5(1 − τ )w. Suppose τ = 40%. Repeat part (b). Compared to the results in (b), do the equilibrium levels of real wage and full-employment increase or decrease? Provide an intuitive explanation to your answers.arrow_forwardin an economy with production function Y = 1.5 × K^0.3L^0.7, K = 343, and L = 512. If factor markets are in equilibrium, then the rental price of capital is (approximately) ________, and the real wage is (approximately) ________. A) 0.5; 0.8 B) 7; 8 C) 0.9; 1.35 D) 1.4; 0.4 E) 0.6; 0.9arrow_forwardExplain why the general level of wages is high in the United States and other industrially advanced countries. What is the single most important factor underlying the long-run increase in average real-wage rates in the United States?arrow_forward
- The rate of job separations in the economy is 0.013 (1.3 percent) and rate of job finding is 0.25 (25 percent). a) If the economy has 500 workers in the labor force, calculate the unemployment rate and the number of unemployed in the steady state. b) If the rate of job separations is 1 percent, what happens to the unemployment rate and the number of unemployed in the steady state? c) If labor force suddenly increases by 20 workers who are seeking work (and the rate of job separations remains at 1 percent), what is the immediate change in the unemployment rate? What is the new steady-state unemployment rate? Draw a graph on how unemployment rate evolves in time.arrow_forwardExplain how equilibrium wages and employment change in the economy when there is an increase in the number of working-age immigrants. Be clear on the short-run and long-run response.arrow_forwardTrue or false: Equilibrium employment is given by the intersection of the wage and the profit curvesarrow_forward
- Assume that the marginal product of labor is given by the following expression: where L is measured in millions. 52.1 MPL = L0.3 Determine the equilibrium real wage if the labor supply equals 100 million workers .arrow_forwardIf the marginal product of labor is less than the nominal wage divided by the price of output, a firm that wishes to maximize profits will raise the real wage. hire more labor. maintain its current level of workers. Olay off workers.arrow_forwardQUESTION 1 For the production function Q = K0.5L0.3 and the budget 143 = 6K + 5L find the optimal employment of L. Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 = 1.2, 1.14 = 1.1).arrow_forward
- Refer to the diagram to the right: Land is the other (fixed) factor of production. Currently the real wage is $30. Calculate the change in land rents due to a $5 increase in the real wage A Land rents = $(Enter your response rounded to the nearest dollar. Be sure to include the minus sign if necessary.) Calculate the change to the total wage bill (total payment to labor) A Total payment to labor$ (Enter your response rounded to the nearest dollar. Be sure to include the minus sign if necessary.) 60- 55- 50- 45- 40- 35- 30- 25- 20 15 10- 5- 0+ 0 Marginal product of labor, MPL Real Wage Real Wage MPL 10 20 30 40 50 60 70 80 90 100 110 Labor, Larrow_forwardVirtually all economists and policymakers agree that, within limits, higher employment is better. If this is true, couldn't the government create more employment by hiring people to dig holes and fill them in again? Is this good economic policy?arrow_forward3.1 Labor market equilibrium occurs at a real wage at which the quantity demanded for labor equals the quantity ................ of labor.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning