Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Efficiency wages is a concept introduced by Janet Yellen. The concept is that the marginal product of labor is affected by the wage rate. Under
Efficiency wages is a concept introduced by Janet Yellen. The concept is that the marginal product of labor is affected by the wage rate. Under this framework, the marginal product is a function of the real wage and labor hours so that mpn(n,w). Specifically, let it be this function, mpn(n,w) = n1 (w w), 0 <<1, 0< <1, w >0 where w is the reservation real wage below which the worker chooses unemployment. The optimal decision making condition of firms continues to be that which we had in class, mpn(n,w) = qFILLw qFILL where > 0, 0 < qFILL < 1 and is taken as given by the firm, and w > 0 is taken as given by the firm. The firmchooses howmanyvacancies to post and knows that vacancies vac transform into hours worked in the following way, n = qFILLvac. Assume that workers and firms separate from their jobs each period so that s = 1. Answer the following questions: 1. (3 points) TRUE, FALSE, or UNCERTAIN? The marginal product increases ceteris paribus as the level of hours worked increases. 2. (3 points) TRUE, FALSE, or UNCERTAIN? The marginal product increases ceteris paribus as the real wage
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started