Question
Please use the following information to answer the next questions. Suppose the production function is Y=100(N-0.005N^2). And the marginal product of labor is MPN=100-N The
Please use the following information to answer the next questions. Suppose the production function is Y=100(N-0.005N^2). And the marginal product of labor is MPN=100-N The aggregate quantity of labor supplied is NS=50+w-Tr, where w is the real wage rate and Tr is the lump-sum transfer that household received from the government.
1: Which of the following statement correctly explains the effect of decreasing transfer payments on labor supply
A: Decreases household wealth and increases labor supply due to the income effect
B: Decreases household wealth and increases labor supply due to the substitution effect
C: Increases household wealth and decreases labor supply due to the income effect
D: Increases household wealth and decreases labor supply due to the substitution effect
E: None of the above
2: Suppose the transfer is 0. the equilibrium real wage is
A: less than or equal to 20
B: more than 20, but less than or equal to 25
C: more than 25, but less than or equal to 30
D: more than 30, but less than or equal to 35
E: more than 35
3: Suppose the transfer is 0, The full-employment level of employment is:
A: less than or equal to 60
B: more than 60, but less than or equal to 65
C: more than 65, but less than or equal to 70
D: more than 70, but less than or equal to 75
E: more than 75
4: Suppose the transfer is 10, the equilibrium real wage is
A: less than or equal to 20
B: more than 20, but less than or equal to 25
C: more than 25, but less than or equal to 30
D: more than 30, but less than or equal to 35
E: more than 35
5: Suppose the transfer is 10, the full-employment level of output is
A: less than or equal to 3,500
B: more than 3,500, but less than or equal to 4,000
C: more than 4,000, but less than or equal to 4,500
D: more than 4,500, but less than or equal to 5,000
E: more than 5,000
6: Suppose the transfer is 10. In addition, the government implements a real minimum wage of 20. The new employment level is
A: less than or equal to 50
B: more than 50, but less than or equal to 60
C: more than 60, but less than or equal to 70
D: more than 70, but less than or equal to 80
E: more than 80
7: Suppose the transfer is 10. In addition, the government implements a real minimum wage of 40. The new employment level is
A: less than or equal to 50
B: more than 50, but less than or equal to 60
C: more than 60, but less than or equal to 70
D: more than 70, but less than or equal to 80
E: more than 80
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