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  3. 3 55 points total an economys aggregate production function is...

Question: 3 55 points total an economys aggregate production function is...

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3. (55 points total) An economys aggregate production function is given by Y- A K N-N2. The marginal product of labor for this production function is MPN A K- 2N. (a) (10 points) Assume that A- 8 and K- 10. Suppose that the labor supply function for this economy is given by NS 20+ 2w. Find the equilibrium real wage rate, the full employment level of employment, and the full-employment level of output for this economy Draw a production function and labor market diagram vertically as we did in class and label this initial equilibrium point as point A(b) (10 points) We,discussed numerous times the conditions resulting from the new economy and the internet boom. Suppose that the internet increases total factor productivity A, so that A- 10. At the same time, the wealth created by the roaring stock market (especially the Nasdaq) changes labor supply so that labor supply is now given by: Ns - 15+ 2w uae,he tha lbr uppy Find the equilibrium real wage rate, the full employment level of employment, and the full-employment level of output for this economy and label on your diagrams as point B. (c) (10 pointsJExplain exactly why the profit maximizing level of labor has changed given the increase in total factor productivity. Againbe very specific with your answer as in using numbers. Begin your answer with: At the same level of labor input N* what it was at point A), the firm is no longer d)(10 points) Are workers better off or worse off due to the increase in total factor productivity (A)?. What has happened to the income tax revenue and why?

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