Question

In: Economics

1. If you observed the equilibrium wage rate decreasing while equilibrium employment increased, which of the...

1.

If you observed the equilibrium wage rate decreasing while equilibrium employment increased, which of the following would be a possible explanation?

the labor force participation rate has decreased

the unemployment rate has increased

there has been an increase in labor productivity

the rate of population growth has increased

2.Firm B produces 300 bicycles at a cost of $489each. Firm B sells 275 bicycles to consumers for $597 each. They do not sell the remaining bicycles in this time period. What is the contribution to GDP? Enter a whole number.

Solutions

Expert Solution

Question No. 1

Answer: The rate of population growth has increased.

The increase in population increases the labor supply and hence the supply curve of labor shifts rightward. The labor demand curve remains constant. In this situation, we will observe a decrease in equilibrium wage rate and an increase in equilibrium employment.

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Question No. 2

Answer:  $1,76,400

Firm B produces 300 bicycles at a cost of $489 each. Firm B sells 275 bicycles to consumers for $597 each. They do not sell the remaining bicycles in this time period.

The GDP includes the final value of all the goods and services produced and sold in an economy in the current year.

Here, we see that the firm B produces 300 bicycles at a cost of $489 each and sells 275 bicycles to consumers for $597 each.

So, the GDP will include the following,

Final value of 275 bicycles + Value( production cost) of unsold 25 bicycles (300 - 275)

GDP = $597 * 275 +  $489 * 25

Or, GDP = $1,64,175 + $12,225

Or, GDP = $1,76,400

So, the contribution to GDP is $1,76,400.

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