Reference no: EM131246952
In this problem we will find the labor demand and labor supply for an economy, from there we will determine the equilibrium quantity of labor, and by plugging that into the production function we will find GDP. Consider Robin Crusoe who has utility function: U(Y,L) = Y - L^2/ 2 where Y is the output that Crusoe consumes, and L is labor hours Crusoe puts in. Suppose in this economy firms only use capital and labor (K and L) as inputs to production, and they can make things with a technology represented by the production function: Y = 0.75 ln(K) + 0.25 ln(L) where “ln” is the natural log.
a) Consider a firm that operates in a perfectly competitive market in which production is as described above, and write down its profit function. What is the objective of this firm? When trying to determine the demand for labor, the firm is trying to decide how many worker hours to employ in order to reach its objective. So what is their choice variable? Therefore, mathematically, what do you have to do in order to find the labor demand?
b) Go ahead and find the demand for labor. When you do, write it down in two ways: - as a function of the nominal wage w. - as a function of the real wage ω. Keep in mind that if y = f (x) then dy/dx = 1/x = ln(x)
c) Now find the labor supply for both the nominal wage and real wage.
d) Now that you have the Labor Demand and the Labor Supply, find the equilibrium: - nominal wage w*. - real wage ω*
e) Knowing this equilibrium wage, find now the equilibrium amount of labor in this economy: L* .
f) Lastly suppose that the price level P is given by the CPI and that it is 100. Suppose also that the equilibrium amount of capital is known, and that it is K* = 143. Find the equilibrium level of output of this economy, both in nominal terms and in real terms. What is the level of unemployment? g) now graph everything.
|
Calculate the average power in kw that can be generated
: Calculate the average power in kW that can be generated in a hydro-electric project from the following data: - If the load factor is 40%, what is the rating of generators installed?
|
|
Describe the challenges that enterprise applications pose
: In your own words, describe the challenges that enterprise applications pose and how are enterprise applications taking advantage of new technologies? A successful answer will include three paragraphs with at least five sentences in each paragra..
|
|
Determine whether the increased life of the steel bridge
: Two bridge designs have been proposed for the new interstate highway to cross Rio de Lubbock. A bridge constructed from wood will cost $6,000 and will last for eight years. A bridge constructed from steel will cost $11,000 and will last for twenty ye..
|
|
What outcome maximizes the joint value
: In light of your answers to parts (a) and (b), briefly provide some intuition for your answers in relation to the "hold-up" problem.
|
|
Labor demand and labor supply for an economy
: In this problem we will find the labor demand and labor supply for an economy, from there we will determine the equilibrium quantity of labor, and by plugging that into the production function we will find GDP. Now find the labor supply for both the ..
|
|
What is his argument and do you agree
: In 450 words please the 2 questions based on the video on the link below: Assange argues that there is a need for sites like WikiLeaks. What is his argument and do you agree?
|
|
Maximize capital gains or to minimize capital losses
: Assume that you have private information that the Fed will buy bonds next week. To maximize capital gains or to minimize capital losses, should you buy bonds or sell bonds now? Assume that you can afford to buy bonds, and you also have bonds to sell
|
|
Quantitative health management technologies
: Explain classification of various qualitative and quantitative health management technologies
|
|
Economy less than government spending increases
: Tax cuts of $100 billion stimulate the economy less than government spending increases of $100 billion do. Explain the reason why tax cuts stimulate the economy less.
|