Reference no: EM131003486
Consider an economy that produces food and cloth. Food is produced using land and labor. Cloth is produced using capital and labor. In other words, land is a factor that is specific to the food sector, capital is specific to the cloth sector, and labor is mobile between the two sectors. This means that the wage paid to labor in both sectors is equalized.
Suppose the marginal product of labor in the food sector is given by MPLF = 100 – LF, where LF is the number of workers in the food sector, and the marginal product of labor in the cloth sector is given by MPLC = 80 – LC, where LC is the number of workers in the cloth sector.
Suppose that there are 100 workers in the economy.
(i) Initially, the world price of food and the world price of cloth are both $1 per unit. Find the equilibrium allocation of labor to each sector, the quantity of each good produced in this economy, and the wage.
(ii) Now, suppose the world price of cloth increases to $3 per unit, while the world price of food stays constant. Repeat the analysis of part (i).
(iii) Derive budget lines for workers, capital owners, and land owners, before and after the change. Who benefits from this change? Who is hurt? Is there any group for which you cannot tell?
|
Draw a decision tree for the blew decision problem
: How does the optimal course of action change with respect to the probabilities of Solares accepting the offers and what is the most that would be worth paying for information regarding whether or not Solares will accept the initial offer?
|
|
Describe public health goals based on a shared vision
: Evaluate existing organizations that might have a stake in effectively addressing a particular health concern. Describe public health goals based on a shared vision with a public health organization. Assess opportunities for a public-private partner..
|
|
High temperature exceeded
: In May in Huntsville, the high temperature exceeded 80°F on 20 days. It rained on 8 days when the high temperature was over 80°F. If we choose any day in May, the probability that it rained on that day is independent of the probability that the high ..
|
|
Statements correctly defines a demand curve
: Which of the following statements correctly defines a demand curve?
|
|
Find the equilibrium allocation of labor to each sector
: Consider an economy that produces food and cloth. Food is produced using land and labor. Cloth is produced using capital and labor. Initially, the world price of food and the world price of cloth are both $1 per unit. Find the equilibrium allocation ..
|
|
Carrying change management with me
: Carrying Change Management with Me" Please respond to the following, After viewing the video below, reflect on the concepts and theories you have researched and learned about over the course of the past several weeks. From the list provided below, ch..
|
|
Differentiates temporary differences and permanent
: Identifies the objectives of accounting for income taxes. Differentiates temporary differences and permanent differences.
|
|
Ideal policy of the median voter-nash equilibrium
: Hotelling’s Model (10pts) Consider the Hotelling’s model with three players, each chooses a policy position on the real line. Is all three players choosing xm (the ideal policy of the median voter) a Nash equilibrium? Explain your answer.
|
|
Argue that it is indeed a nash equilibrium
: Recall the second price auction game. Now suppose that there are three players, 1, 2, and 3, bidding for a single object in a second price auction. All three players value the object at 10, i.e., v1 = v2 = v3 = 10. For i = 1, 2, 3, let bi denote play..
|