1) Consider an economy in which the marginal product of labor MPN is MPN = 309 - 2N, where N is the amount of labor used. The amount of labor supplied, NS, is given by NS = 92 + 12w, where w is the real wage. a What are the equilibrium values of employment and the real wage?

b. The government passes minimum-wage legislation that requires firms to pay a real wage greater than or equal to 8. What are the resulting values of employment and the real wage?

2) Analyze how each of the following would affect the current equilibrium wage rate, the full-employment level of employment, and the full-employment level of output. Illustrate each answer with appropriate graphs.

(a) There is a large and unexpected decrease in stock market prices. (b) A nuclear accident destroys a significant portion of the economy's capital stock.