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Wage rigidity: Consider an economy with the following Cobb- Douglas production function:Y=K^(1/3)L^(2/3)The economy has 1,000 units of capital and a labor force of 1,000 workers.a. Derive the equation describing labor demand in this economy as a function of the real wage and the capital stock. (Hint: Use the equation MPL = W/P)b. If the real wage can adjust to equilibrate labor supply and labor demand, what is the real wage? In this equilibrium, what are employment, output, and the total amount earned by workers?c. Now suppose that Congress, concerned about the welfare of the working class, passes a law requiring firms to pay workers a real wage of 1 unit of output. How does this wage compare to the equilibrium wage?d. Congress cannot dictate how many workers firms hire at the mandated wage. Given this fact, what are the effects of this law? Specifically, what happens to employment, output, and the total amount earned by workers?e. Will Congress succeed in its goal of helping the working class? Explain.f. Do you think that this analysis provides a good way of thinking about a minimumwage law? Why or why not?
In your 1st position as a Finance manager you have been given responsibility for decreasing use of residential heating fuel in state. Choose one of three legislative proposals to accomplish this target
The MacBurger Company a chain of fast food restaurants, expects to earn $200 million after taxes for the current year. The company has a policy of paying out half of its net after-tax income to the holders of the company's 100 million shares of c..
J.C. Olson & Co. had earnings per share of $8 in year 2006, andit paid a $4 dividend. Book value per share at year's end was$80. During the same period, the total retained earningsincreased by $24 million. Olson has no preferred stock, andno new c..
put $20,000 on deposit on your 13th birthday at 5 percent compounded annually. On your 14th birthday, the account begins earning 6 percent. Then on your 15th birthday, it begins earning 7 percent. You plan to withdrawal equal amounts on your sixty-..
An Economics section at a large university keeps track of its majors beginning salaries. We address the question of the value of taking econometrics
For both sets of calculations, compare the firm's output price and the calculated average variable cost and average total cost. Should the firm shutdown immediately when the total fixed cost equals $1,000,000 Should the firm shut down immediately ..
Suppose worker productivity increased at the rate of 1.9% per year. If the labor force grew by 1.5% per year, what rate of increase in RGDP would be sustainable without increasing inflation pressures
Vincent van Gogh can produce paintings at constant marginal cost cV V G = 1. The population of buyers of VVG paintings is grouped into two categories: Serious Art Collectors (SAC) and Casual Art Collectors (CAC). The SAC to CAC population ratio is..
Online Educators (OE), a not-for-profit firm exempt from taxes, is considering replacement of some electronic equipment associated with its distance learning (DL) facility. They spent $100,000 on the equipment 3 years ago and have depreciated it t..
The daily demand for Invigorated PED shoes is estimated to be where Ax represents the amount of advertising spent on shoes (X), Px is the price of good X, Py is the price of good Y, and M is average income.
You are a manager T Glass, Inc.- a mirror and window supplier. Recently, you conducted a study of the production process for your single-side encapsulated window. The results form the study are summarized in the table below, and are based on 5 uni..
Consider a simultaneous move quantity-setting game with two firms facing a demand curve p = 100 - q. Both firms have marginal cost of 20. Suppose one firm maximizes profit and the other maximizes revenue, but both take into account the other firm'..
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