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Suppose the marginal product of labor in the economy is given by MPN = 0.01(3,000 - N), while the supply of labor is 500 + 550w.
(a) Find the market-clearing real wage rate and level of employment.
(b) What happens to the wage rate and employment if wealth rises, reducing the supply of labor to 200 + 400w?
(c) What happens to the wage rate and employment if after wealth has risen as in part (b), there is a productivity shock that increases the marginal product of labor to MPN = 0.03(3,000 - N)?
(d) What happens if the government imposes a minimum wage of 60? Is there involuntary unemployment?
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