The production function in an economy is: Y = 2 (5.00Nminus0.0025Nsquared ), where the marginal product of labor is given by: MPN = 2 (5.00minus0.0050N ). The equation for the labor supply curve is: NS = 55.0 + 10 (1minust ) w , where NS is the amount of labor supplied, w is the real wage and t is the tax rate on wage income. The tax rate is t = 0.50. Determine the labor demand function. (Enter your responses rounded to two decimal places) : ND = nothingminus nothingw.

Question

Business

Maya Phelps

25 September, 21:11

The production function in an economy is: Y = 2 (5.00Nminus0.0025Nsquared ), where the marginal product of labor is given by: MPN = 2 (5.00minus0.0050N ). The equation for the labor supply curve is: NS = 55.0 + 10 (1minust ) w , where NS is the amount of labor supplied, w is the real wage and t is the tax rate on wage income. The tax rate is t = 0.50. Determine the labor demand function. (Enter your responses rounded to two decimal places) : ND = nothingminus nothingw.

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Answers (1)

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Ainsley Martin · Answer 1

The labor demand function would be ND=1000-100w

Explanation:

According to the given data we have the following:

Real wage = MPN

MPN=2 (5-0.0050N)

Real wage=w

So, using the equation, w=MPN we determine the labor demand function as follows:

w=2 (5-0.0050 N)

w=10-0.01 N

0.01 N=10-W

N=10-w/0.01

N=1000-100w

Therefore the labor demand function would be ND=1000-100w