Agenda. Productivity, Output, and Employment, Part 1. The Production Function. The Production Function. The Production Function. The Demand for Labor
|
|
- Hilary Bradley
- 1 years ago
- Views:
Transcription
1 Agenda Productivity, Output, and Employment, Part A production function shows how businesses transform factors of production into output of goods and services through the applications of technology. Factors of production: Capital (K) Labor () Other (raw materials, land, energy, etc.) The productivity of factors depends on technology and management (A)
2 The economy s production function is: = AF(K, ) Shows how much output () can be produced from a given amount of capital (K) and labor () and a given level of technology (A). The parameter A is total factor productivity or the effectiveness with which K and are used. A more specific production function that works well in macroeconomics is the Cobb- Douglas production function. = AK α (1-α) For the U.S. economy it would be: = AK : Output and Capital : Output & Capital Shows how depends on K for a given and A. K
3 : Output and Capital Two main properties of this production function: Exhibits increasing returns to capital. Slopes upward because more K produces more. Exhibit diminishing marginal product of capital. Slope becomes flatter because each additional increment of K produces less additional. : Output and Capital Marginal product of capital, MPK = / K. Equals the slope of production function graph ( vs. K). MPK is always positive. MPK declines as K increases The Marginal Product of Capital The Marginal Product of Capital = A 0 F(K, 0 ) MPK K 3-11 K
4 : Output & Capital : Output and Capital What happens if or A changes? = A 0 F(K, 0 ) K : Output and Labor : Output & Labor Shows how depends on for a given K and A
5 : Output and Labor Two main properties of this production function: Exhibits increasing returns to labor. Slopes upward because more produces more. Exhibit diminishing marginal product of labor. Slope becomes flatter because each additional increment of produces less additional. : Output and Labor Marginal product of labor, MP = /. Equals the slope of production function graph ( vs. ). MP is always positive. MP declines as increases The Marginal Product of Labor = A 0 F(K 0, ) The Marginal Product of Labor MP
6 : Output & Labor : Output and Labor What happens if K or A changes? = A 0 F(K 0, ) Productivity is calculated as a residual: A = K Productivity growth is calculated as: Observations about productivity growth: Productivity moves sharply from year to year. Productivity grew strongly from the mid-1950 s through 1973, very slowly from 1973 through 1995, and more quickly again since %ΔA = ΔA/A *
7 Supply shocks: Supply shocks affect the amount of output that can be produced for a given amount of inputs. Also called productivity shocks. Supply shocks: Supply shocks shift the production function. egative or adverse shock: A decline in A usually causes the slope of production function to decrease at each level of input. Positive or beneficial shock: An increase in A usually causes the slope of production function to increase at each level of input Effects of an Adverse Supply Shock = A 0 F(K 0, ) The demand for labor is determined by individual business firms. The aggregate demand for labor is the sum of all the business firms demand for labor. The demand for labor depends on the costs and benefits of hiring additional workers
8 How much labor do firms want to use? Assumptions: The capital stock fixed, i.e., a short-run analysis. Workers are homogeneous. The labor market is competitive. What is the cost of hiring one more worker? The marginal cost of hiring one more worker is the cost of that worker to the firm, i.e., the nominal wage: W Firms maximize profits What is the benefit of hiring one more worker? The benefit of hiring one more worker is the additional income that the worker generates, i.e., the marginal revenue product of labor: MRP = P * MP How much labor do firms want to use? A profit-maximizing firm will hire additional workers up to the point where the marginal revenue product of labor equals the nominal wage: W = MRP = P * MP
9 How much labor do firms want to use? Marginal Cost of Hiring an Extra Worker w This equilibrium condition: W = MRP = P * MP can be re-written as: w = MP because w= W/P and MRP = P * MP Marginal Benefit of Hiring an Extra Worker MP The Determination of Labor Demand w, MP
10 How much labor do firms want to use? Costs and benefits of hiring one extra worker. If w > MP, profits rise if number of workers declines. How much labor do firms want to use? The labor demand curve shows the relationship between the real wage rate (w) and the quantity of labor demanded (). If w < MP, profits rise if number of workers increases. When w = MP, profits are maximized Determination of the Labor Demand Curve w, MP The Labor Demand Curve, D. w 0 w 0 Changing the real wage rate: An increase in the real wage rate means w > MP unless is reduced so the MP increases. MP A decrease in the real wage rate means w < MP unless is increased so the MP decreases
11 The Labor Demand Curve, D. The (Aggregate) Labor Demand Curve w, MP The labor demand curve is downward sloping. The higher the real wage, the less labor firms will hire. Because w = MP in equilibrium (regardless of what w is), the D curve is the same as the MP curve Factors that shift the labor demand curve: Effect of an Increase in K or A w, MP Changes in the capital stock, ΔK. Increases in K raise MP and shift the labor demand curve to the right. Supply shocks, ΔA. Beneficial supply shocks raise MP and shift the labor demand curve to the right. D
12 Key Diagram #1: Key Diagram #2a: Demand for Labor = A 0 F(K 0, ) w, MP D Key Diagrams #1 & #2a. Factors that Shift the Production Function and the Demand for Labor: Increases in the capital stock, K, shift the production function higher, increase the MP and the demand for labor. Increases in productivity, A, shift the production function higher, increase the MP and the demand for labor
Econ 100B: Macroeconomic Analysis Fall Problem Set #3 ANSWERS (Due September 15-16, 2008)
Econ 100B: Macroeconomic Analysis Fall 2008 Problem Set #3 ANSWERS (Due September 15-16, 2008) A. On one side of a single sheet of paper: 1. Clearly and accurately draw and label a diagram of the Production
I d ( r; MPK f, τ) Y < C d +I d +G
1. Use the IS-LM model to determine the effects of each of the following on the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment, and the
Chapter 3 A Classical Economic Model
Chapter 3 A Classical Economic Model what determines the economy s total output/income how the prices of the factors of production are determined how total income is distributed what determines the demand
ECON 3560/5040 Week 2. 1. What Determines the Total Production of Goods and Services
ECON 3560/5040 Week 2 NATIONAL INCOME 1. What Determines the Total Production of Goods and Services - Factors of production: the inputs used to produce goods and services (1) Capital (K) (2) Labor (L)
Chapter 14. Markets for Factor Inputs
Chapter 14 Markets for Factor Inputs Competitive Factor Markets Characteristics 1. Large number of sellers of the factor of production 2. Large number of buyers of the factor of production 3. The buyers
POTENTIAL OUTPUT and LONG RUN AGGREGATE SUPPLY
POTENTIAL OUTPUT and LONG RUN AGGREGATE SUPPLY Aggregate Supply represents the ability of an economy to produce goods and services. In the Long-run this ability to produce is based on the level of production
Chapter 3 Productivity, Output, and Employment
Chapter 3 Productivity, Output, and Employment Multiple Choice Questions 1. A mathematical expression relating the amount of output produced to quantities of capital and labor utilized is the (a) real
How Wages Are Determined in Labor Markets
ACTIVITY 4-5 How Wages Are Determined in Labor Markets This activity examines how wages and employment are determined in two types of labor s. A perfectly competitive labor is one in which all buyers and
8. Average product reaches a maximum when labor equals A) 100 B) 200 C) 300 D) 400
Ch. 6 1. The production function represents A) the quantity of inputs necessary to produce a given level of output. B) the various recipes for producing a given level of output. C) the minimum amounts
Practice Problems on the Capital Market
Practice Problems on the Capital Market 1- Define marginal product of capital (i.e., MPK). How can the MPK be shown graphically? The marginal product of capital (MPK) is the output produced per unit of
Labor Economics. Unit 3. Labor Demand
2016-1 Labor Economics Unit 3. Labor Demand Prof. Min-jung, Kim Department of Economics Wonkwang University Textbook : Modern Labor Economics: Theory and Public policy written by Ronald G. Ehrenberg This
Agenda. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, Part 2. The AD Curve. Aggregate Demand and Aggregate Supply
Agenda Aggregate Demand and Aggregate Supply The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, art 2 13-1 13-2 Aggregate Demand and Aggregate Supply The AD-AS model is derived from
The Full-Employment Model. Stiglitz, Walsh (2006) Economics Chapter 24 (MA6)
The Full-Employment Model Stiglitz, Walsh (2006) Economics Chapter 24 (MA6) Macroeconomic Equilibrium all markets are interrelated what happens in one market will have impact on other markets wages, interest
Integrating the Input Market and the Output Market when Teaching Introductory Economics
1 Integrating the Input Market and the Output Market when Teaching Introductory Economics May 2015 Clark G. Ross Frontis Johnston Professor of Economics Davidson College Box 7022 Davidson, NC 28035-7022
The goods market clears when desired investment equals desired national saving real interest rate will change to bring about the equilibrium
IS/LM Model (Ch 9) 1. The FE (Full employment)line: Equilibrium in the Labor Market 2. The IS (Investment Saving) Curve: Equilibrium in the Goods Market 3. The LM Curve: Asset Market Equilibrium 4. General
The Macroeconomy in the Long Run The Classical Model
PP556 Macroeconomic Questions The Macroeconomy in the ong Run The Classical Model what determines the economy s total output/income how the prices of the factors of production are determined how total
Market for cream: P 1 P 2 D 1 D 2 Q 2 Q 1. Individual firm: W Market for labor: W, S MRP w 1 w 2 D 1 D 1 D 2 D 2
Factor Markets Problem 1 (APT 93, P2) Two goods, coffee and cream, are complements. Due to a natural disaster in Brazil that drastically reduces the supply of coffee in the world market the price of coffee
AP Microeconomics Unit V: The Factor (Resource) Market Problem Set #5
1. /15 2. /20 3. /15 4. /25 Total: /75 Name: Team: AP Microeconomics Unit V: The Factor (Resource) Market Problem Set #5 1. ( /15) Define the term and explain a situation that demonstrates the real world
Analytical Problems: Chapter 9
Analytical Problems: Chapter 9 1. (a) The increase in desired investment shifts the IS curve up and to the right, as shown in Figure 9.21. The price level rises, shifting the LM curve up and to the left
Practice Problems on Production Function and Labor Market
Practice Problems on Production Function and Labor Market 1- What is a production function? What are some factors that can cause a nation s production function to shift over time? What do you have to know
13. If Y = AK 0.5 L 0.5 and A, K, and L are all 100, the marginal product of capital is: A) 50. B) 100. C) 200. D) 1,000.
Name: Date: 1. In the long run, the level of national income in an economy is determined by its: A) factors of production and production function. B) real and nominal interest rate. C) government budget
Chapter 13. Aggregate Demand and Aggregate Supply Analysis
Chapter 13. Aggregate Demand and Aggregate Supply Analysis Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics In the short run, real GDP and
Microeconomics Instructor Miller Practice Problems Labor Market
Microeconomics Instructor Miller Practice Problems Labor Market 1. What is a factor market? A) It is a market where financial instruments are traded. B) It is a market where stocks and bonds are traded.
Chapter 7 Production Costs
Chapter 7 Production s MULTIPLE CHOICE Exhibit 1 Production of pizza data Workers Pizzas 1 4 2 1 3 15 4 18 5 19 Exhibit 1 shows the change in the production of pizzas as more workers are hired. The marginal
Outline of model. Factors of production 1/23/2013. The production function: Y = F(K,L) ECON 3010 Intermediate Macroeconomics
ECON 3010 Intermediate Macroeconomics Chapter 3 National Income: Where It Comes From and Where It Goes Outline of model A closed economy, market-clearing model Supply side factors of production determination
AP Microeconomics Chapter 12 Outline
I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.
MODULE 70: THE MARKETS FOR
MODULE 70: THE MARKETS FOR LAND & CAPITAL SCHMIDTY SCHOOL OF ECONOMICS THE PURPOSE OF THIS MODULE IS TO SHOW HOW WE CAN USE SUPPLY AND DEMAND TO MODEL THE MARKETS FOR THE LAND AND CAPITAL INPUTS. Learning
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Firms that survive in the long run are usually those that A) remain small. B) strive for the largest
Cosumnes River College Principles of Macroeconomics Problem Set 9 Due November 10, 2015
Name: Solutions Cosumnes River College Principles of Macroeconomics Problem Set 9 Due November 10, 2015 Fall 2015 Prof. Dowell Instructions: Write the answers clearly and concisely on these sheets in the
Chapter 9. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis. 2008 Pearson Addison-Wesley. All rights reserved
Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Chapter Outline The FE Line: Equilibrium in the Labor Market The IS Curve: Equilibrium in the Goods Market The LM Curve:
Eco 200 Group Activity 4 Key Chap 13 & 14 & 15
Eco 200 Group Activity 4 Key Chap 13 & 14 & 15 Chapter 13: 1. 4 th Edition: p. 285, Problems and Applications, Q4 3 rd Edition: p. 286, Problems and Applications, Q4 a. The following table shows the marginal
Chapter 11 Perfect Competition
Chapter 11 Perfect Competition Perfect Competition Conditions for Perfectly competitive markets Product firms are perfect substitutes (homogeneous product) Firms are price takers Reasonable with many firms,
Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:
Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive
Chapter 04 Firm Production, Cost, and Revenue
Chapter 04 Firm Production, Cost, and Revenue Multiple Choice Questions 1. A key assumption about the way firms behave is that they a. Minimize costs B. Maximize profit c. Maximize market share d. Maximize
Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis
Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Multiple Choice Questions 1. The FE line shows the level of output at which the market is in equilibrium. (a) Goods (b) Asset
Macroeconomic Analysis Econ 6022 Level I
1 / 66 Macroeconomic Analysis Econ 6022 Level I Lecture 8 Fall, 2011 2 / 66 Business Cycle Analysis: A Preview What explains business cycle fluctuations? Two major business cycle theories - Classical theory
Problem Set #4: Aggregate Supply and Aggregate Demand Econ 100B: Intermediate Macroeconomics
roblem Set #4: Aggregate Supply and Aggregate Demand Econ 100B: Intermediate Macroeconomics 1) Explain the differences between demand-pull inflation and cost-push inflation. Demand-pull inflation results
THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL*
Chapter 8 THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL* The Classical Model: A Preview Topic: Real Variables 1) Real variables A) are those that determine the cost of living. B) are those that determine
Chapter 6 Economic Growth
Chapter 6 Economic Growth 1 The Basics of Economic Growth 1) The best definition for economic growth is A) a sustained expansion of production possibilities measured as the increase in real GDP over a
CASE FAIR OSTER PEARSON
CASE FAIR OSTER PEARSON Publishing as Prentice Hall PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N Prepared by: Fernando Quijano w/shelly Tefft 2of 35 Input Demand: The Labor and Land Markets
NAME: INTERMEDIATE MICROECONOMIC THEORY SPRING 2008 ECONOMICS 300/010 & 011 Midterm II April 30, 2008
NAME: INTERMEDIATE MICROECONOMIC THEORY SPRING 2008 ECONOMICS 300/010 & 011 Section I: Multiple Choice (4 points each) Identify the choice that best completes the statement or answers the question. 1.
Mods Practice
Mods 17-18-19 Practice Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The aggregate demand curve shows the relationship between the aggregate price level
Pre-Test Chapter 25 ed17
Pre-Test Chapter 25 ed17 Multiple Choice Questions 1. Refer to the above graph. An increase in the quantity of labor demanded (as distinct from an increase in demand) is shown by the: A. shift from labor
INVESTMENT DECISIONS and PROFIT MAXIMIZATION
Lecture 6 Investment Decisions The Digital Economist Investment is the act of acquiring income-producing assets, known as physical capital, either as additions to existing assets or to replace assets that
Long Run Economic Growth Agenda. Long-run Economic Growth. Long-run Growth Model. Long-run Economic Growth. Determinants of Long-run Growth
Long Run Economic Growth Agenda Long-run economic growth. Determinants of long-run growth. Production functions. Long-run Economic Growth Output is measured by real GDP per capita. This measures our (material)
Short-Run Production and Costs
Short-Run Production and Costs The purpose of this section is to discuss the underlying work of firms in the short-run the production of goods and services. Why is understanding production important to
The Circular Flow of Income and Expenditure
The Circular Flow of Income and Expenditure Imports HOUSEHOLDS Savings Taxation Govt Exp OTHER ECONOMIES GOVERNMENT FINANCIAL INSTITUTIONS Factor Incomes Taxation Govt Exp Consumer Exp Exports FIRMS Capital
Solutions to Spring 2015 Week 13 Tutorial Questions (Ch9)
Chapter 9: Q1: Macroeconomics P.324 Review Questions #6 Q2: Macroeconomics P.324 Review Questions #7 Q3: Macroeconomics P.324 Review Questions #8 Q4: Macroeconomics P.325 Numerical Problems #1 Q5: Macroeconomics
g. Less h. More i. Price j. Price k. Purchase a product l. Quantity supplied
Section 1 Word list a. Ability & willingness b. Chart form c. Decrease d. Demand e. Graph form f. Increase g. Less h. More i. Price j. Price k. Purchase a product l. Quantity supplied m. Responsiveness
SOLUTIONS TO TEXT PROBLEMS:
SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Three key facts about economic fluctuations are: (1) economic fluctuations are irregular and unpredictable; (2) most macroeconomic quantities fluctuate together;
Profit Maximization. 2. product homogeneity
Perfectly Competitive Markets It is essentially a market in which there is enough competition that it doesn t make sense to identify your rivals. There are so many competitors that you cannot single out
OVERVIEW. 7. In perfectly competitive markets, wages are determined by supply and demand.
15 DEMAND FOR INPUTS OVERVIEW 1. Each firm is involved in two markets, a market for its output and a market for inputs. Decisions the firm makes in one market affect its decisions in the other market.
AP Microeconomics Review
AP Microeconomics Review 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return
Pre-Test Chapter 15 ed17
Pre-Test Chapter 15 ed17 Multiple Choice Questions 1. The extended AD-AS model: A. distinguishes between short-run and long-run aggregate demand. B. explains inflation but not recession. C. includes G
CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY
CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY Learning goals of this chapter: What forces bring persistent and rapid expansion of real GDP? What causes inflation? Why do we have business cycles? How
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 10 - Output and Costs - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The short run is a period of time in which A)
Chapter 22. Aggregate Demand and Supply Analysis
Chapter 22 Aggregate Demand and Supply Analysis Aggregate Demand The relationship between the quantity of aggregate output demanded and the price level when all other variables are held constant Based
Notes 10: An Equation Based Model of the Macroeconomy
Notes 10: An Equation Based Model of the Macroeconomy In this note, I am going to provide a simple mathematical framework for 8 of the 9 major curves in our class (excluding only the labor supply curve).
Monopoly and Monopsony Labor Market Behavior
Monopoly and Monopsony abor Market Behavior 1 Introduction For the purposes of this handout, let s assume that firms operate in just two markets: the market for their product where they are a seller) and
OUTPUT AND COSTS. Chapter. Decision Time Frames
Chapter 10 OUTPUT AND COSTS Decision Time Frames Topic: Short Run 1) The short run is a period of time in which A) the quantities of some resources the firm uses are fixed. B) the amount of output is fixed.
Review Questions - CHAPTER 8
Review Questions - CHAPTER 8 1. The formula for steady-state consumption per worker (c*) as a function of output per worker and investment per worker is: A) c* = f(k*) δk*. B) c* = f(k*) + δk*. C) c* =
Chapter 6 MULTIPLE-CHOICE QUESTIONS
Chapter 6 MULTIPLE-CHOICE QUETION 1. Which one of the following is generally considered a characteristic of a perfectly competitive labor market? a. A few workers of varying skills and capabilities b.
Econ 101: Principles of Microeconomics
Econ 101: Principles of Microeconomics Chapter 12 - Behind the Supply Curve - Inputs and Costs Fall 2010 Herriges (ISU) Ch. 12 Behind the Supply Curve Fall 2010 1 / 30 Outline 1 The Production Function
BADM 527, Fall 2013. Midterm Exam 2. Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME
BADM 527, Fall 2013 Name: Midterm Exam 2 November 7, 2013 Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME 1. According to classical theory, national income (Real
3 Macroeconomics LESSON 4
Aggregate Supply Introduction and Description Aggregate supply is the quantity of output that firms are willing and able to produce for the economy. In the long run, the level of output depends on the
Agenda. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, Part 3. Disequilibrium in the AD-AS model
Agenda The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, art 3 rice Adjustment and the Attainment of General Equilibrium 13-1 13-2 General equilibrium in the AD-AS model Disequilibrium
Employment and Pricing of Inputs
Employment and Pricing of Inputs Previously we studied the factors that determine the output and price of goods. In chapters 16 and 17, we will focus on the factors that determine the employment level
Labor Demand. Labor Economics VSE Praha March 2009
Labor Demand Labor Economics VSE Praha March 2009 Labor Economics: Outline Labor Supply Labor Demand Equilibrium in Labor Market et cetera Labor Demand Model: Firms Firm s role in: Labor Market consumes
ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS
ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of July 14 Chapter 11 WRITE: [2] Complete the following labour demand table for a firm that is hiring labour competitively and selling its
Module 2 Lecture 5 Topics
Module 2 Lecture 5 Topics 2.13 Recap of Relevant Concepts 2.13.1 Social Welfare 2.13.2 Demand Curves 2.14 Elasticity of Demand 2.14.1 Perfectly Inelastic 2.14.2 Perfectly Elastic 2.15 Production & Cost
Introduction to The IS-LM Model
Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Economics 282 University of Alberta Introduction to The IS-LM Model This name originates from its basic equilibrium conditions:
4) If skiing at Banff and skiing at Whistler are substitutes, an increase in the price of skiing at Banff will:
ECON 1900-2 Chapter 3 Review Quiz One economic principle states that, ceteris paribus, the lower the price of a commodity the greater will be the quantity of the commodity consumers will wish to purchase.
Profit Maximization. PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University
Profit Maximization PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 The Nature and Behavior of Firms A firm An association of individuals Firms Who have organized themselves
DEMAND AND SUPPLY IN FACTOR MARKETS
Chapter 14 DEMAND AND SUPPLY IN FACTOR MARKETS Key Concepts Prices and Incomes in Competitive Factor Markets Factors of production (labor, capital, land, and entrepreneurship) are used to produce output.
THE ECONOMY AT FULL EMPLOYMENT. Objectives. Production and Jobs. Objectives. Real GDP and Employment. Real GDP and Employment CHAPTER
THE ECONOMY AT 29 FULL EMPLOYMENT CHAPTER Objectives After studying this chapter, you will able to Describe the relationship between the quantity of labour employed and real GDP Explain what determines
Aggregate Demand & Aggregate Supply
24 Chapter 10 Demand & Supply 10 Demand & Supply A. Basic concepts AS-AD model demand AD = C + I + G + NX supply Long-run aggregate supply (LAS) Short-run aggregate supply (SAS) Equilibrium output & price
Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review
Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review 1. Implicit costs are: A) equal to total fixed costs. B) comprised entirely of variable costs. C) "payments" for self-employed
CH 10 - REVIEW QUESTIONS
CH 10 - REVIEW QUESTIONS 1. The short-run aggregate supply curve is horizontal at: A) a level of output determined by aggregate demand. B) the natural level of output. C) the level of output at which the
For a closed economy, the national income identity is written as Y = F (K; L)
A CLOSED ECONOMY IN THE LONG (MEDIUM) RUN For a closed economy, the national income identity is written as Y = C(Y T ) + I(r) + G the left hand side of the equation is the total supply of goods and services
The Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a
In this chapter, look for the answers to these questions: What is a perfectly competitive market? What is marginal revenue? How is it related to total and average revenue? How does a competitive firm determine
Profit and Revenue Maximization
WSG7 7/7/03 4:36 PM Page 95 7 Profit and Revenue Maximization OVERVIEW The purpose of this chapter is to develop a general framework for finding optimal solutions to managerial decision-making problems.
Unit 3 Practice Exam Answer the questions on a separate sheet of paperplease do not write on this practice test.
Unit 3 Practice Exam Answer the questions on a separate sheet of paperplease do not write on this practice test. 1. Which of the following items is most likely to be an implicit cost of production? a.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 11 Perfect Competition - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a
Practice Exam. Name: Date: 1. When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand,
Practice Exam Name: Date: 1. When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand, workers will underestimate the real wage rate workers will
The Labour Market: Demand and Supply
The Labour Market: Demand and Supply Learning Objectives Understand that the demand for a factor of production such as labour is derived from the demand for the product and that it will be influenced by
Economic Growth. (c) Copyright 1999 by Douglas H. Joines 1
Economic Growth (c) Copyright 1999 by Douglas H. Joines 1 Module Objectives Know what determines the growth rates of aggregate and per capita GDP Distinguish factors that affect the economy s growth rate
11 PERFECT COMPETITION. Chapter. Competition
Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat
THE LABOUR MARKET ECONOMY LEVEL OCCUPATION LEVEL INDIVIDUAL FIRM
THE LABOUR MARKET ECONOMY LEVEL OCCUPATION LEVEL INDIVIDUAL FIRM DEMAND FOR LABOUR IS DERIVED DEMAND Derived demand: occurs when the demand for a factor of production arises from the demand for the output
Economics 201 Fall 2010 Introduction to Economic Analysis Problem Set #6 Due: Wednesday, November 3
Economics 201 Fall 2010 Introduction to Economic Analysis Jeffrey Parker Problem Set #6 Due: Wednesday, November 3 1. Cournot Duopoly. Bartels and Jaymes are two individuals who one day discover a stream
Aggregate Demand and Aggregate Supply
Demand and Supply Chapter 31 Copyright 21 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College
AGGREGATE DEMAND AND AGGREGATE SUPPLY
33 AGGREGATE DEMAND AND AGGREGATE SUPPLY Questions for Review 1. Two macroeconomic variables that decline when the economy goes into a recession are real GDP and investment spending (many other answers
The Markets for the Factors of Production. Derived Demand. Our Example: Farmer Jack. Two Assumptions
8 The Markets for the Factors of roduction R I N C I E S O F ECONOMICS F O U R T H E D I T I O N N. G R E G O R Y M A N K I In this chapter, look for the answers to these questions: hat determines a competitive
PART A: For each worker, determine that worker's marginal product of labor.
ECON 3310 Homework #4 - Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART
Consumption, Saving, and Investment, Part 1
Agenda Consumption, Saving, and, Part 1 Determinants of National Saving 5-1 5-2 Consumption and saving decisions : Desired consumption is the consumption amount desired by households Desired national saving
Aggregate Supply and Aggregate Demand
Aggregate Supply and Aggregate Demand Econ 120: Global Macroeconomics 1 1.1 Goals Goals Specific Goals Be able to explain GDP fluctuations when the price level is also flexible. Explain how real GDP and
Problem Set 4. We are asked to label each of the seven statements as true, false or uncertain and to justify our answers briefly.
Problem Set 4 Question 2 We are asked to label each of the seven statements as true, false or uncertain and to justify our answers briefly. (a) The aggregate supply relation implies that an increase in
Chapter 3 Specific Factors and Income Distribution
Chapter 3 Specific Factors and Income Distribution Prepared by Iordanis Petsas To Accompany International Economics: Theory and Policy, Sixth Edition by Paul R. Krugman and Maurice Obstfeld Chapter Organization
Sample Exam According to Figure 6.1, A. Soup is a normal good C. Soup is a Giffen good B. Soup is an inferior good D. Bread is an inferior good
Sample Exam 2 1. Suppose the base year for a Lespeyres index is 2001. The value of the index is 1.3 in 2004 and 1.6 in 2006. By how much did the cost of the bundle increase between 2004 and 2006? A..3%
1 The Market for Factors of Production Factors of Production are the inputs used to produce goods and services. The markets for these factors of production are similar to the markets for goods and services
Extra Problems #3. ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma. Notice:
ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma Extra Problems #3 Notice: (1) There are 25 multiple-choice problems covering Chapter 6, 9, 10, 11. These problems are not homework and