Microeconomics Answers

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? prove with it graphs

In a pure exchange economy with two goods, G and H, the two traders have Cobb-Douglas utility functions. Amos' utility is U_a= (G_a )^∝ (H_∝)^(1-∝) and Elise’s is U_e= (G_e)^β (H_e)^(1-β). What are their marginal rates of substitution? Between them, Amos and Elise own 100 units of G and 50 units of H. Thus, If Amos has G_a and H_a, Elise has G_e =100-G_a and H_e =50-H_a. 

Solve for their contract curve. Show all your calculations clearly from your marginal utilities.

A large number of deaths have been recorded since the outbreak of the COVID-19 pandemic. This has reduced the number of households able to work and therefore reduces the supply of labour.

Explain, using a demand-supply diagram, the impact of a decrease in the supply of labour on the equilibrium wage rate and the equilibrium level of employment.

Calculate how much of each service is produced under the following circumstances, which we label A,B, and C -All two spend all their time planting flowers (A) -All two spend all their time hunting deer (B) -All two spend half of their time planning flowers and half of their time hunting deer (C). -Simba only plants flowers, while Nala hunts deer (D) (2) Graph the production possibilities frontier (PPF) for this economy. Using your answers to part (1), identify points A, B, C and D on your graph. Please clearly draw the graph.

Do the production functions below exhibit diminishing returns to labor (to get full credit, you will need to show mathematically whether or not these functions exhibit diminishing returns to labor –for example, answering only “yes” will get you no credit)?

(a) Q = F(K,L) = √1000K^3.5L². Make sure to 1) show the mathematical steps (3 pts) and 2) explain your answer (2 pts).