Reference no: EM131000887
Developia produces two goods, manufactures and food, using three factors of production: capital, land and labor. The production of manufactures requires capital and labor, while the production of food uses land and labor. All the arable land is in the south while all the factories are in the north. Labor is mobile between regions and sectors. The economy faces a given world prices of cloth and food, and has given endowments of capital, land, and labor. Let the price of cloth be one.
a: Explain how to draw the PPF.
b: What is the effect on the allocation of labor between sectors and of output of the two goods in Developia of a freeze in the rest of the world that resulted in an increase in the world price of food.
c: How does this affect the production point along the PPF?
d: What is the effect of the freeze on the nominal and real earnings of each of the factors?
e: The freeze also results in migration into Developia. What is the effect of this migration on the post freeze equilibrium? In particular, what happens to the PPF, to the output and to the nominal and real earnings of the three factors?
|
What is ultimate change in the dollar size of money supply
: Assume the public holds a fixed amount of currency and the chartered banks have a desired reserve ratio of 10%. What is the ultimate change in the dollar size of loans caused by the action of the Bank of Canada? What is the ultimate change in the dol..
|
|
What the market wage and the shadow wage measure
: The graph below, with the market wage (W) and the shadow wage (W*) on the vertical axis and hours of market work (Hw) on the horizontal axis, is meant to represent the labor supply situation of two different women with identical preferences but with ..
|
|
Calculate unemployment rate-employment-to-population ratio
: Calculate (to one decimal place) the unemployment rate, the employment-to-population ratio, and the labor force participation rate. In addition, please calculate what the unemployment rate would have been if individuals who were involuntarily employe..
|
|
Level of utility and draw various combinations
: Utility is given as: U(x, y) = x^1/2y^1/2. Graph a typical indifference curve for this function. (Hint: Choose a level of utility and draw various combinations of x, y that result in that level. What is the marginal rate of substitution (MRS) for thi..
|
|
Labor between sectors and of output of the two goods
: Developia produces two goods, manufactures and food, using three factors of production: capital, land and labor. The production of manufactures requires capital and labor, while the production of food uses land and labor. What is the effect on the al..
|
|
The supply of low-skilled workers is fairly elastic
: Assume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, What if the policy goal is to raise wages for this gr..
|
|
Using central bank foreign exchange policy
: Based on the discussion in this chapter, update the controversy over the value of the Chinese yuan in foreign currency markets. Is China still using central bank foreign exchange policy to maintain the value of the yuan? What is the current policy of..
|
|
What was that worth
: ESPN currently pays the NFL $1.1 billion per year for eight years for the right to exclusively televise Monday Night Football. What is the net present value of this investment if the parent Disney Company has an opportunity interest rate equal to its..
|
|
What is his after-tax-after-child care wage
: Tom earns $15 per hour for up to 40 hours of work each week. He is paid $30 per hour for every hour in excess of 40. Tom faces a 20 percent tax rate and pays $4 per hour in child care expenses for each hour he works. For all hours Tom works up to his..
|