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Consider the argument presented by James Dorn, "The Minimum Wage Delusion, and the Death of Common Sense." On page 392, paragraph 23, he states, "The best anti-poverty program is not the minimum wage but economic freedom that expands workers' choices and allows entrepreneurs to freely hire labor without the government dictating the terms of the exchange, except to prevent fraud and violence." He considers the law of supply and demand to be the primary force determining wages. Does the argument presented by Warren Farrel, "Exploiting the Gender Gap," (p. 373) offer evidence to support Dorn's position? Be detailed and accurate.tion 3. The land of Grim can be described by the following production fune Moreover, there is no population growth nor is there technological progress. (a) Find the steady-state capital stock per worker, output per worker, and consumption per worker as a function of the saving rate and the depreciation rate. (b) Research shows that the depreciation rate in the Land of Grim is 10% per year. Make a table showing steady-state capital per worker, output per worker, and consumption per worker for sav- ing rates of 0%, 10%, 20%, 30% .. . up to 100%. What saving rate maximizes output per worker? What saving rate maximizes consumption per worker? (c) Derive the formula for the marginal product of capital. Calcu- late the marginal product of capital for each value of the saving rate from part (b). What do these calculations tell you about the relationship between MP and steady-sate consumption per worker?1 Constant Population Consider the following production function: Y = F(K N.) = KIN Assume that capital depreciates at rate o and that savings is a constant proportion s of output: St = BY Assume that investment is equal to savings: It = St Finally, assume that the population is constant: NI = Nil = L 1. The production function above expresses output as a function of capital and labor (workers). Derive a function that expresses output per worker as a function of capital per worker (i.e. find y = f(1)). 2. Write down the capital accumulation equation in terms of capital per worker (i.e. an equation with only ke+1, ka, 5, and s. 3. Solve for the steady state level of capital per worker as a function of 6 and s. 4. Solve for the steady state level of output per worker as a function of & and s. 5. What is the steady state growth rate of output per worker? 6. What is the steady state growth rate of output? 2 Growing Population Consider the following production function: Y = F( K., N.) = (K/ + N. )= Assume that capital depreciates 5% each year and that households save 5% of their income. Assume that investment is equal to savings. Finally, assume that the population is growing 15% each year.6. (25 points) Show all your work. Suppose the production function of an economy is given by Y= K1/3 (AN)28, where Y is output, K is capital, AN is effective labour. The saving rate for this economy is denoted by s, the depreciation rate is 6, the population growth is gy, and the rate of technological progress is ga. A) Show that this production function is characterized by constant returns to scale. Show your work in detail for full marks. B) Transform the production function into a relation between output per effective worker and capital per effective worker. C) What is the law of motion for capital? D) Derive the expressions for capital per effective worker in steady state. Show your work. E) What is output per effective worker in the steady state? Show your work. F) What is the expression for consumption per effective worker in the steady state? G) Suppose s = 12%, 8 = 9%, gN=2%, and gA =3%. Find the steady state values of: (i) capital stock per effective worker; (ii) Output per effective worker; (iii) growth rate of output per effective worker; (iv) growth rate of output per worker; (v) growth rate of output; (vi) consumption per effective worker. H) Suppose s = 30%, 6 = 25%, gy=5%, and gA =4%. Find the steady state values of: (i) capital stock per effective worker; (ii) Output per effective worker; (ili) growth rate of output per effective worker; (iv) growth rate of output per worker; (v) growth rate of output; (vi) consumption per effective worker. 1) Are people better off in (G) or in (H)? Explain.The table below displays the information about all goods and services produced in HULKland in various years. The Ipad Mini is a new good introduced in 2012 so prices and quantities for Ipad Mini are not available (NA) for 2010 and 2011. Years Ice Cream Kiwis Ipad Mini Price Quantity Price Quantity Price Quantity 2010 4.25 3,000 1.25 1,000 NA NA 2011 4.50 3,200 1.50 1,200 NA NA 2012 5.00 4,000 2.00 1,500 500 100 a) (6 POINTS) Compute the Nominal GDP for each year. b) (4 POINTS) Write down the 6 steps that are needed to compute the RGDP with the chain weighted method. c) (10 POINTS) Using the chain weighted GDP method, compute the Real GDP for each year using 2010 as the base year
