In WORKLAND,the marginal product of labour (MPN)is given by MPN = 100 - N,where N is the amount of labour used,and the labour supply by NS = 10 + 5w + 2T,where w is the real wage and T is a lump-sum tax.What is the equilibrium real wage in WORKLAND,if T = 21?
A)6
B)10
C)8
D)5

Question

Quizplus · Accepted Answer

The equilibrium real wage is found where the marginal product of labor (MPN) equals the labor supply (NS).MPN = 100 - NNS = 10 + 5w + 2TSubstituting T = 21, we get:NS = 10 + 5w + 2(21)NS = 10 + 5w + 42NS = 52 + 5wSetting MPN = NS, we get:100 - N = 52 + 5wN = 100 - 52 - 5wN = 48 - 5wSubstituting this expression for N back into the NS equation, we get:52 + 5w = 48 - 5w10w = 4w = 0.4Therefore, the equilibrium real wage in WORKLAND is 0.4.

In WORKLAND,the Marginal Product of Labour (MPN)is Given by MPN