A mathematical expression relating the amount of output produced to quantities of capital and labor utilized is the
production function
In the production function Y=AF(K,N), A is _____, K is _____, and N is ______.
total factor productivity; the capital stock; the number of workers employed
In the production function Y = AF(K,N), total factor productivity is
A
Suppose the economy's production function is Y=AK^.3N^.7. If K = 2000, N = 100, and A =1 , then Y =246. If K and N both rise by 10%, and A is unchanged, by how much does Y increase?
10%
IF Y = A x N x (75 + K/N), where K = 1000, N = 20, and A = 10, what happens if K doubles and N doubles?
Y doubles
Suppose the econmy's production function is Y = AK^.3N^.7. When K = 1000, N = 50, and A =15, what is Y?
1842
Suppose that in 2003 Freedonia had GDP equal to 2000 million, the capital stock was equal to 1700 million, the number of employees equaled 70 million. The production function is Y = AK^.25N^.75. Total factor productivity of the economy in that year was ap
12.87
The table below represent Freedoni's macroeconomic data for 2003 and 2004.
Suppose that the production function is given by Y = AK^.25N^.75. Between 2003 and 2004, total factor productivity of Freedonia's economy increased by
-1.5%
The two main characteristics of the production function are
it slopes upward from left to right, and the slope becomes flatter at the input increases
If the maringal product of capital doesn't changes as the amount of capital increase, a figure showing the relationship between output and capital
is a straight line with constant upward slope
The marginal product of capital is the increase in
output form a one-unit increase in capital
The fact that production function relating output to capital becomes flatter as we move form left to right means that
there is diminishing maringal productivity of capital
The maringal product of labor
decreases as the number of workers already employed increases
The fact that the production function relating output to labor becomes flatter as we move form left to right means that
there is diminishing maringal productivity of labor
An adverse supply shock would
shift the production function down and decrease maringal products at every level of employment
An invention that speeds up the INternet is an example of
a supply shock
A supply shock that reduces total factor productivity directly affects which term in the production function Y = AF(K,N)?
A
Economists often treat the economy's capital stock as fixed because
it takes a long time for new investment tan the scrapping of old capital to affect the overall quantity of capital
Changes in the capital stock occur___, and changes in the amount of labor that firms employ occur _____.
slowly; quickly
An increase in real wage reate will cause
a movement along the labor demand curve
A decrease in real wage would result in a
movement along the labor demand curve, causing an increase in the number of workers hired by the firm
An increase in the number of workers hired by a firm could result form
a decrease in the real wage
What two factors should you equate in deciding how many workers to employ?
The maringal product of labor and the real wage rate
One reason that firms hire labor at the point where w = MPN is
if w > MPN, the cost (w) of hiring additional workers exceeds the benefits (MPN) of hiring them, so they should hire fewer workers
Firms hire labor at the point where the
nominal wage rate equals the marginal revenue product of labor
The Upstart Company has the following production function
If the company hires 4 workers, which of the following could be real wage rate?
4
The Widget Company has the following production function.
If widgets sell for $6 each and the wage rate is $33, how many workers will the company hire?
4
Your boss want to know if you should lay off any workers. You answer that you should lay off workers if the
marginal production labor is less than the real wage rate
Zowie! Surfboards has the following production function
If surfboards sold for $30 and the nominal wage rate was $200, how many workers would the firm employ?
4
The marginal product of labor (measured in units of output) for Expando Corp. is given by
MPN=A(400-N)
where A measures productivity and N is the number of labor hours used in production suppose the price of output is $3 per unit and A = 2.0. What will be
397
An adverse supply shock, such as a reduced supply of raw materials, would
decrease the marginal product of labor
Which of the following events would lead to an increase in the marginal product of labor for every quantity of labor?
A favorable supply shock such as fall in the price of oil
A winter ice storm has paralyzed the intre east coast, reducing productivity sharply. THis supply hock shifts the marginal product of labor curve
down and to the left, reducing the quantity of labor demanded at any given real wage
A technological breakthrough in using photons for computers will increase the productivity of those working with computers a hundredfold. You would expect this breakthrough to shift the
marginal product of labor curve up and to the right, raising the quantity of labor demanded at any given real wage
The aggregate supply of labor is the
sum of the labor supplied by everyone in the economy
If jeff's wage rate rises, he decided to work fewer hours. From this, we can infer that
for Jeff, the substitution effect is less than the income effect
As a result of the superb economics essay that you wrote during this quarter, you won the Adam Smit prize of $100. The recept of these funds would be an example of
a pure income effect
A person is more likely to increase labor supply in response to an increase in the real wage, the ___ is the income effect and the ___ is the substitution effect
smaller; larger
A permanent increase in the real wage rate has a ____ income effect on labor supply than a temporary increase in real wage, so labor supply is ___ with a permanent wage increase than for a temporary wage increase
larger; less
The survey on labor supply by Killingsworth found that
labor supply rises in response to a temporary increase in the real wage, but falls in response to a permanent increase in the real wage
Suppose the marginal product of labor is
MPN=200-.5N
where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. What is the equilibrium real wage?
10
Suppose the marginal product of labor is
MPN=200-.5N
where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. What is the equilibrium quantity of employment?
380
Suppose the marginal product of labor is
MPN=200-.5N
where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. If a supply shock increase the marginal product of labor by 10 (to MPN=210-.5N), by now h
2
Suppose the marginal product of labor is
MPN=200-.5N
where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. If a supply shock increase the marginal product of labor by 10 (to MPN=210-.5N), by now h
16
A tremendous flood along the Mississippi River destroys thousands of factories, reducing the nation's capital stock by 5%. What happens to current employment and the real wage rate?
Both employment and the real wage rate would decrease
A sharp increase in stock prices makes people much wealthier. If the main effect of this increased wealth is felt on labor supply, what happens to current employment and the real wage rate?
Employment would decrease and the real wage would increase
An adverse oil-price shock reduces labor demand. What happens to current employment and the real wage rate?
Both employment and real wage reate would decrease
The equilibrium level of employment, achieved after the complete adjustment of wages and prices, is known as the
full-employment level of employment
Full-employment output is the level of out put that firms in the economy supply when
wages and prices are fully adjusted
What is the unemployment rate if there are 150 million people employed, 25 million people unemployed, and 25 million not in the labor force?
14.3%
The___ is the number of unemployed divided by the labor force and the ___ is the number of employed divided by the adult population
unemployment rate; employment ratio
What is the participation rate if there are 125 million people in the labor force, 100 million people employed, and 25 million not in the labor force?
83%
How many people are unemployed if the employment ratio is 75%, there are 90 million people employed, and there are 20 million people no in the labor force?
10 million
The city of hope has a labor force of 100. Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs. On January 1, May 1, and September 1 of each year, 50 people lose their jobs for a period of four months b
7%
The city of hope has a labor force of 100. Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs. On January 1, May 1, and September 1 of each year, 50 people lose their jobs for a period of four months b
2.15 months
Frictional unemployment arises when
workers must search for suitable jobs and firms must search for suitable workers
Cyclical unemployment arises when
output and employment are below full-employment levels
According to Okun's law, an increase in the unemployment rate will cause ___ in the level of employment and ___ in the level of output
a decrease; a decrease
A summ that full-employment level of output is %5000 billion and the natural unemployment rate is 5%. Suppose the current unemployment rat is 8%. What would the current level out output according to Okun's law (when the Okun's law coefficient is 2)?
$4700 billion
According to Okun's law, if output grew 7% and full employment output rose 5%, what would be the change in unemployment rate?
-1%