Question

HOMEWORK # 3 Productivity. Outeut and Employment #1 suppose the economy's production function is v-AK0.3 0.7 When K 2,000 N=50 what is r? (in % form and 1 decimal) #2 According to Okun's law, if actual output grew 3% and full-employment output rose 5%, what would be the change in the unemployment rate? #3 Cupcake Stand # Cupcakes Produced # workers 0 12 30 36 40 If Cupcakes sell for $5 each and the wage rate (nominal) is $40, how many workers will the Cupcake Stand hire? #41f Dr. Zimmer's wages increase and he works more hours, what can you infer about his substitution and income effects #5 A positive shock increases labor demand, but leave labor supply unchanged, what happens to current employment and the real wage rate? Show Graphically! #6 A positive shock increases labor supply, but does not affect labor demand, what happens to current employment and the real wage rate? Show Graphically

Answer 1

#1.

Given,

Y = AK^0.3N^0.7

K = 2000

N = 50

A = 15

Y = 15 * (2000)^0.3 * (50)^0.7

  = 15 * 9.7793 * 15.4624

= 2268.189

= 22.7 %