Question

Consider the information in the file named HW2 - Production Data for the Economy. The file shows a part of the marginal-product function for a firm. The firm hires more that 90 workers. Therefore, the file begins with the 91st worker to save space. The first 90 workers are already producing a total of 10,530 units of output. There are 100 such firms in the economy. All the firms are identical (to make our calculations less cumbersome).

Next, assume that the total number of people who are willing and able to work is 10,000. Wages and prices are fully flexible downwards and upwards. No frictional or structural unemployment exist in the economy.

In this economy, the equilibrium real wage equals --------units and the equilibrium level of employment equals-------- persons.

If it is not too much trouble, could you also please verify that the potential GDP in this country is ---------units?

In this economy, workers receive a total of -------units of the real GDP as their wages while the owners of capital receive the remaining ----------units.

Suppose that the government follows some lax immigration policies and as a result 200 immigrant workers enter the country. Now we will have the following situations:

Real wage = -------units

Total real wage received by immigrant workers = --------units

The change in the share of native workers in real GDP = ---------units (enter this with a negative sign for the decrease and with no sign for the increase)

The change in the share of capitalists in real GDP = --------units enter this with a negative sign for the decrease and with no sign for the increase)

Note: Use the formulas for geometric areas to calculate the last three numbers.

Labor MPL 91 26 9224 22 94 20 Note: The first 90 workers in this firm have already produced a total of 10,530 18 16 14 96 97 98 99 100 101 1024 12 10 000+

Answer 1

Labour	MPL	TP
91	26	10556
92	24	10580
93	22	10602
94	20	10622
95	18	10640
96	16	10656
97	14	10670
98	12	10682
99	10	10692
100	8	10700
101	6	10706
102	4	10710
103	2	10712
104	0	10712
105	-2	10710
106	-4	10706
107	-6	10700
108	-8	10692
109	-10	10682
110	-12	10670
1) the firm will hire untill the MPL>=0 .
At 104 where MPL = 0.
But we can see that given identical firms Total demand for workers = 104*100 = 10400
Total supply = 10000
Therefore each firm demand for 100 workers .'
Total employment = 100*100 = 10,000
At 100 , w = MPL = 8.
Potential GDP = 100*(Full employment Total Product of each firm) = 1,070,000
2) workers receive = (w=8)*10,000 = 80,000
Owners of capital receive = 1070000-80000 = 990000
3) L = 10200
Each firm employ = 102.
real wage = MPL at L=102 =4
Total wage received by immigrant workers = 200*4 = 800 units
change in share of native workers = 160000-(4*10000) = 120000 units
change in share of capitalist :
total product= 100*(TP at L=102) = 100*10710 =1071000 share of capitalist= 1071000- 4*(10200) = 1030200 change in share of capitalist = 1030200- 990000 = 40,200