Question
Before the COVID-19 outbreak California - the 5th-largest economy in the world - is in equilibrium with a fixed supply of labor. (a) Draw the
Before the COVID-19 outbreak California - the 5th-largest economy in the world - is in equilibrium with a fixed supply of labor. (a) Draw the graphs for (i) output as a function of labor, (ii) the marginal product of labor as a function of labor, and identify the levels of output and the real wage for a given level of labor. These graphs can be drawn by hand. (b) The COVID-19 pandemic resulted in lockdowns that required people to work from home and parents to supervise their children who were now at home and attending class over Zoom. This, and other pandemic-related issues, caused a downward shock to total factor productivity. On the graphs from part (a) above, add the curves for the post-pandemic situation given this change in total- factor productivity, and identify the new levels.
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