How much output does the economy produce? 100 units of output What are w and r? w=0.5, r=0.5 How share of output does labor receive? 50% A typhoon kills half of the population, what is the new level of output? L = 50 What are the new w2 and r2? w2=0.707,r2=0.707 How share of output does labor receive now? 70.7%