Answer to Question #254977 in Microeconomics for Kojo

Question

Question One Assume in a two-sector economy made up of agriculture and manufacturing, the government introduces a subsidy of y per hour on labour in the manufacturing sector. What will be the effect of the policy on the equilibrium wage, total employment as well as employment in agriculture and manufacturing?

Question Two

What is a Pareto superior allocation? When is an allocation said to be Pareto improving? At what point is Pareto Efficiency reached. In Figure 1, W represents the endowment while X, Y, and Z represent alternative allocations. In the light of the above definitions, describe the various moves to and from these points as reflecting Pareto superior, Pareto improving and Pareto efficient allocations. Figure 1 Grace Judith Vials of perfume Bales of cloth Bales of cloth Vials of perfume U J U G W X Y Z Contract Curve

Question Three

Discuss the main features of the Ricardian Theory of Rent. How do these contrast with the Modern Theory of Rent?

Answer 1

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