Suppose that the production function is Y =9 x0 SN5 With this production function, the marginal product of labor is MPN = 45 K 5/N5 The labor supply curve is NS = 115x[(1 - 1)xw, where w is the real wage rate, t is the tax rate on labor income, and hence (1 - )xw is the after-tax real wage rate. The capital stock is K= 25. Assume that the tax rate on labor income, t, equals zero The equilibrium level of the real wage is 1.45 (Round your answer to two decimal places) The equilibrium level of employment is (Round your answer to one decimal place) Now, suppose the tax rate is changed to t 02. Now the equilibrium level of the real wage is (round your answer to two decimal places). With the tax rate now at t-0.2, the equilibrium level of employment is (round your answer to one decimal place)

Suppose that the production function is Y =9 x0 SN5 With this production function, the marginal product of labor is MPN = 45 K 5/N5 The labor supply curve is NS = 115x[(1 - 1)xw, where w is the real wage rate, t is the tax rate on labor income, and hence (1 - )xw is the after-tax real wage rate. The capital stock is K= 25. Assume that the tax rate on labor income, t, equals zero The equilibrium level of the real wage is 1.45 (Round your answer to two decimal places) The equilibrium level of employment is (Round your answer to one decimal place) Now, suppose the tax rate is changed to t 02. Now the equilibrium level of the real wage is (round your answer to two decimal places). With the tax rate now at t-0.2, the equilibrium level of employment is (round your answer to one decimal place)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.6P

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Suppose that the production function is Y = 9 K0.5N0.5 With this production function, the marginal product of labor is MPN = 4.5 KO.5/NO.5. The labor supply curve is NS = 105 x [(1 - t)xwP, where w is the real wage rate, t is the tax rate on labor income, and hence (1 - t)xw is the after-tax real wage rate. The capital stock is K= 25. Assume that the tax rate on labor income, t, equals zero. The equilibrium level of the real wage is (Round your answer to two decimal places). The equilibrium level of employment is (Round your answer to one decimal place).
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