Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 23, Problem 1RQ
To determine
Relation between the Gini ratio and the distribution of income.
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3. Suppose that there are two countries with dif-
ferent levels of total factor productivity, and
that these differences exist because of barriers
to technology adoption in the low-productivity
country. Also suppose that these two countries
do not trade with each other. Now, suppose that
residents of each country were free to live in
either country. What would happen, and what
conclusions do you draw from this?
A software company in Silicon Valley uses programmers (labor) and computers (capital) to produce apps for mobile devices. The firm estimates that when it comes to labor, MPL = 5 apps per month while PL = $1,000 per month. And when it comes to capital, MPC = 8 apps per month while PC = $1,000 per month. If the company wants to maximize its profits, it should: LO16.5 a. Increase labor while decreasing capital. b. Decrease labor while increasing capital. c. Keep the current amounts of capital and labor just as they are. d. None of the above.
PROBLEMS 1. Workers are compensated by firms with “benefits” in addition to wages and salaries. The most prominent benefit offered by many firms is health insurance. Suppose that in 2000, workers at one steel plant were paid $20 per hour and in addition received health benefits at the rate of $4 per hour. Also suppose that by 2010 workers at that plant were paid $21 per hour but received $9 in health insurance benefits. LO17.1
By what percentage did total compensation (wages plus benefits) change at this plant from 2000 to 2010? What was the approximate average annual percentage change in total compensation?
By what percentage did wages change at this plant from 2000 to 2010? What was the approximate average annual percentage change in wages?
If workers value a dollar of health benefits as much as they value a dollar of wages, by what total percentage will they feel that their incomes have risen over this time period? What if they only consider wages when calculating their incomes?…
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- Assume there are two countries: South Korea and the United States. South Korea grows at 4 and the United States grows at 1. For the sake of simplicity, assume they both start from the same fictional income level, 10,000. What will the incomes of the United States and South Korea he in 20 years? By how many multiples will each countrys income grow in 20 years?arrow_forward7. LO 2, 4 Suppose that a consumer can earn a higher wage rate for working overtime. That is, for the first q hours the consumer works, he or she receives a real wage rate of w, and for hours worked more than q he or she receives w, where W2>W1. Suppose that the consumer pays no taxes and receives no nonwage income, and he or she is free to choose hours of work. (a) Draw the consumer's budget constraint, and show his or her optimal choice of consump- tion and leisure (b) Show that the consumer would never work hours, or anything very close to q Explain the intuition behind this. (c) Determine what hours. happens if the overtime wage rate w2 increases. Explain your results in terms of income and substitution effects. You must consider the case of a worker who initially works overtime, and a worker who initially does not work overtime.arrow_forwardWhich would be evidence of an increase in income inequality over time in the United States? O a decrease in the percentage of total personal income received by the highest quintile O an increase in the percentage of total personal income received by the highest quintile O an increase in the percentage of total personal income received by the four lowest quintiles O an increase in the percentage of total personal income received by the lowest quintilearrow_forward
- LO 2, 4 Suppose that a consumer can earn a higher wage rate for working overtime. That is, for the first q hours the consumer works, he or she receives a real wage rate of w1, and for hours worked more than q he or she receives w2, where w2 > w1. Suppose that the consumer pays no taxes and receives no nonwage income, and he or she is free to choose hours of work. a. Draw the consumer's budget constraint, and show his or her optimal choice of consumption and leisure. b. Show that the consumer would never work q hours, or anything very close to q hours. Explain the intuition behind this. c. Determine what happens if the overtime wage rate wz increases. Explain your results in terms of income and substitution effects. You must consider the case of a worker who initially works overtime, and a worker who initially does not work overtime.arrow_forward%24 A household with income that is two-thirds of the poverty threshold has ratio of income to poverty of O 0.67. O 1.50. O 3.20. O0.23. Unit 7- Chapter 1..xlsx 0Unit 7- Chapter 1..xlsx Topic 2 (2).docx Topic 2 (1).docx 11:07 PM 73 F ENG 自 ins prt sc delete f12 pue LL3 114 SI unu backspace -> bock 7. 5. 55 enter () H. pause * shift ctrlarrow_forwardThe government announces programs designed to reduce the share of income going to the top quintile from 60% to 20%. You predict that the most likely result is that: O mean household income will fall, because the highest income earners will earn less and work less. median household income will rise, because some of the 40% of redistributed income will be transferred to the third quintile. after redistribution, each quintile will receive 20% of total wealth. O the lowest quintile will receive the 40% taken from the top quintile and switch places.arrow_forward
- Figure 9.2, U.S. Labor Market Figure 9.2 represents the U.S. labor market. Assume that labor and capital are the only factors of production. Also assume the initial supply schedule of labor is denoted by S, and consists entirely of native U.S. workers. The demand schedule of labor is denoted by Do Hourly Wage/S O O 18 Select one: O 12 O 9 So 2 Consider Figure 9.2. Policies that permit Mexican workers to freely migrate to the United States would likely be resisted by: S₁ a. U.S. capital owners b. Native U.S. workers 3 Do 6 Quantity of Labor c. U.S. capital owners and native U.S. workers d. Neither U.S. capital owners or native U.S. workersarrow_forwardThe graph below shows production possibilities frontiers for Cornelius and David, two priests that aid the Mondoshawan race. David is Cornelius' apprentice, and they each spend their time either deciphering old prophecies or developing plans to save the world (which comes in handy later). Use this information to answer the following 3 questions. Plans 10 9 8 7 6 LO 5 4 3 2 1 8° Cornelius David 0 1 2 3 4 5 c. Both (a) and (b). d. Neither (a) nor (b). 6 7 8 b. 10 translations and 4 plans. C. 5 translations and 11 plans. d. 9 translations and 9 plans. 9 Translations 10 1. (Cornelius and David) Which of the following statements is true? a. Cornelius' opportunity cost of one translation is ½ of a plan. b. Cornelius' opportunity cost of one translation is less than David's opportunity cost of one translation. 2. (Cornelius and David) If David and Cornelius engage in trade, which of the following points is both feasible and efficient in production? a. 18 translations and 14 plans.arrow_forward2. Suppose that back in 1870 the average household wealth in a U.S. state was 20 + w under coverture, where w is the average wage rate a married woman earned for market work in that state. Under the wife's "self-ownership," sup- pose that the total household wealth was 10 + 4w. Assume, as do Geddes and Leuck (2002), that under coverture the household was like a firm managed and owned by the husband, whereas under self-ownership it was like an equal partnership between wife and husband. (a) Explain why the household wealth increased more rapidly through the wife's market wage under self-ownership than under coverture. (b) Comparing the average husband's wealth under coverture and the wife's self-ownership, explain why he would have preferred coverture for low values of his wife's wage but self-ownership for high values. (c) Draw a graph to identify the value of wives' wage rate beyond which husbands would have been willing to voluntarily abandon coverture in the state.arrow_forward
- If a nation with an aging population admits more low-skilled immigrants: wealth disparity decreases. O income disparity increases. job creation is reduced. O income mobility is reduced.arrow_forwardAs income transfer programs accompanying the War on Poverty increased beginning in the latter half of the 1960s, what happened to poverty in the United States? Check all that apply. O The adjusted poverty rate has declined rapidly and is now less than half of the official poverty rate. O The poverty rate declined substantially in the period before the War on Poverty, but not in the period after the start of the War on Poverty. O In 2018, the adjusted poverty rate was only 4 percentage points lower than the official rate in 1970. O The War on Poverty has been largely ineffective in reducing the rate of poverty in the United States.arrow_forwardNo written by hand solution Suppose there are two sectors, call them A [agriculture] and M [manufacturing]. People earn say $5 an hour in agriculture and $10 an hour in manufacturing. Suppose we are interested in the share of the bottom 40% and the richest 20%. Let x be the share of people in manufacturing. Derive a formula that gives you the shares of income earned by the lowest 40% of the population and the richest 20% of the population as a function of x. This is a connection between structural transformation and the behavior of inequality.arrow_forward
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