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2. Becker's theory of taste based discrimination (a) Explain whether the presence of employer taste based discrimination always results in a wage differential between workers that belong to the minority (discriminated) group and workers that belong to the majority group.

(b) Explain the consequences of employer taste based discrimination for the composition of the workforce of firms.

(d) Explain whether employee taste-based discrimination always results in a wage differential between workers that belong to the minority (discriminated) group and workers that belong to the majority group.

1. In this question you have to indicate whether you think the statement is true or false and explain why. You do not get any points if you only state whether the statement is true or false. (a) Assuming consumption and leisure are normal goods, hours worked will fall when the wage increases if the income effect dominates the substitution effect.

(b) In order to use schooling as a signal, the signal must be more costly for low skilled workers than for high-skilled workers.

(c) When the government imposes a payroll tax on workers, the effects are identical to the effects had the government imposed the tax on employers.

(d) If in the principal-agent model the principal can only offer a contract w = b y (instead of w = s + b y) then the firm will set b strictly less than 1.

Im having a hard time drawing problem 1. I don't understand how to draw out the year 1 and the year 2 budget constraints and indifference curves going through the bundle (q1,q2)= 6,4 Question 1) Suppose you consume goods 1 and 2 and no other goods. In addition, assume that your indifference curves over bundles of goods #1 and #2 exhibit strictly diminishing marginal rates of substitution (that is, the indifference curves are convex). In year 1, assume that your income is $10 ( = $10) and the price of good #1 and the price of good #2 are both $1 (1 = 2 = $1). During year 1, you choose to purchase 6 units of good #1 (1 = 6) and 4 units of good #2 (2 = 4). Suppose during the next year, year 2, the price of good #1 goes up to $2.50 (1 = $2.50) and the price of good #2 goes up to $1.25 (2 = $1.25). Also, assume your income went up during year #2 - now = $20. If we assume that you don't save or borrow (so you spend all of your income during the year you earn it) and we assume that your preferences don't changes across years, when are you happier - year 1 or year 2? That is, which year will you reach a higher level of utility given your consumption of good #1 and good #2? (Hint: draw the budget constraints and an indifference curve going through the bundle (1, 2) = (6,4).)

Fill in the blanks to make the following statements correct a. Long-run sustained increases in potential output are called ___. b. Increases in material living standards occur with increases in real ____. c. An important cost of economic growth is the sacrifices of current ____ in exchange for investment that raises future ____. 2. a. An increase in the real interest rate leads to a(n) ____ in the amount of national saving as households reduce their ____. b. An increase in the interest rate leads firms to ____ their amount of desired investment. c. In the long run, with output equal to potential, equilibrium in the market for financial capital determines the interest rate as well as the amount of ____ and ____ in the economy. d. Following a shift in either the supply of national saving or the demand for investment, there will be a change in both the equilibrium ____ and the amount of ____ in the economy. 3. Fill in the blanks to make the following statements correct. a. An important aspect of the Neoclassical growth model is that increases in the supply of one factor, all else held constant, imply eventually ____ marginal returns to that factor. b. In the Neoclassical growth model, an increase in the labour force (with capital held constant) will ____ total output and ____ the level of per capita output. c. When a new and better harvesting machine replaces an old harvesting machine on a farm and is more productive than the old one, we say there has been ____ technical change. d. Some advanced growth theories are based on the assumption that technological change is ____ to the economic system; others are based on the possibility that there are ____ marginal returns to investment. e. Neoclassical growth theories are pessimistic because they emphasize ____ returns with a given state of ____. Advanced growth theories are more optimistic because they emphasize the unlimited potential of _____.