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2. Question 2 [25 marks) Table 1 sets out Sue's Surfboards' total product schedule. Tim 1: Labour (workers per week} Output (surfboards per week) 1
2. Question 2 [25 marks) Table 1 sets out Sue's Surfboards' total product schedule. Tim 1: Labour (workers per week} Output (surfboards per week) 1 30 70 120 160 190 220 (a) Calculate the average product of labour and the marginal product of labour. Draw the total product curve. the average product curve and the marginal product curve within the same diagram. [10 marks] JQQMNlm AND JQQMNHG (b) Over what output range does Sue's Surfboards enjoy the benefits of increased specialization and division of labour? [2 marks] [c] Over what output range does Sue's Surfboards eaqaerience diminishing marginal product 0! labour? [2 marks] Read the news clip. which is copied right below. titled \"Najran Cement Shuts Down Second Production Line". then answer questions d. e and f. News clip: A second production line of Najran Cement has been temporarily shut down owing to poor market conditions. The company stated that any nancial effect of this decision in?! be publicly announced. Source: dobalcementcom. March 9. 2017 (d) Explain the nancial effect mentioned in the news clip in terms of TFC. WC. and TC. [3 marks] (e) Explain the financial effect of the shutdown in terms of prot maximization or loss minimization. [4 marks] (0 Why is the decision to shut down the second production line temporary? [4 marks] 3. Question 3 (25 marks) In the following exercise we consider the production and the long run growth of different economies. Our starting point is a simple model of the Cobb-Douglas production technology with a capital share in production of 1/3. and a labor share in production of 2/3. (a) First. let's consider the simplest Cobb-Douglas technology as l; = 1951.5. Convert the Cobb-Douglas production function into per capita terms. Why might we be more concerned about per capita output rather than total output when discussing the welfare impacts of economic growth? [5 marks] Show how the adjusted production function looks like if we also consider total factor productivity (TFP). How does the production function look like in per capita terms? Why do we think that it is a good idea to augment the production function with the TFP? [5 marks] 4QQMN13G em 4QQMN14G (c) Now consider the general Solow model with per capita production function given by y, = Alf. to determine which country has the hight steady-state level of capital and output using the following data in Table 1. Assume that labor is xed and we can dene the population of any country in such a way that it is equal to one. Which country has the highest steady-state per capita capital stock and output per capita? Which country has the lowat? [5 marks] 4 s 6 r1 China 0.79 0.32 0.05 035 Hungary 0.95 0.20 0.04 0.40 South Korea 0.84 0.35 0.06 0.45 Table 2: Parameter values (d) Explain the likely driving forces behind your answers in (c). [5 marks] (e) Let's focus on Hungary and assume that the economy is in its steady-state represented by the capital and output per capita levels that were calculated in (c). Now consider that TFP in Hungary increases from 0.95 to 1. Using the Solow Diagram. show how the economy adjusts to this structural change. How do capital per capita and output per capita evolve over time? [5 marks]
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