Application: The outbreak of the bubonic plague- the Black Death- in 1348 reduced the population of...

Application: The outbreak of the bubonic plague- the Black Death- in 1348 reduced the population of Europe by about one-third within a few years. Because the marginal product of labor increases as the amount of labor falls, this massive reduction in the labor force should have raised the marginal product of labor and equilibrium wages. The evidence confirms the theory: real wages approximately doubled during the plague years. The peasants who were fortunate enough to survive the plague enjoyed economic prosperity.

Suppose the outbreak of the bubonic plague- the Black Death- in 1348 did not cause the productivity parameter A to change. Use the production function graph relating output and labor and the labor market diagram to show the effects of the outbreak on

(a) the marginal product of labor (MPN), and

(b) the equilibrium wage rate (w).

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Expert Solution

Rahul Sunny answered 8 months ago

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