Category: Economics

Question 21 (3 points)From the list on your right select the letter that contains the word, phrase, name, etc that best matches the word, phrase, name, etc listed on the left.
Left:
Real Balance (wealth) effect
Sticky wages
The AD curve intersects the SRAS curve to the left of the LRAS curve
LRAS curve
Island of Puerto Rico ‘destroyed’ by Hurricane Maria
Duration: 3:07 User: n/a Added: 9/20/17
Right:
1. A decline in the overall price level improves the purchasing power of monetary wealth leading to increased spending.
2. AD curve shifts to the left
3. Possible decline in Chinese import from the U.S.
4. The level of Real GDP is fixed at a given amount regardless of the price level
5. A rightward movement along the AD curve to a lower level of real GDP demanded
6. Possible increase in U.S. export to China
7. No matter what the price level is, real wages remain constant.
8. Inflationary gap is observed

6 of 25 This test: 25 point(s) possible This question: 1 point(s) possible
Suppose the random variable Y has a mean of 42 and a variance of 100. Let Z=11002(Y-42).
Show that μZ=0. (Round your responses to two decimal places)
Show that σz2=1. σZ2=var,(Y-]rY2=1 (Round your responses to two decimal places)
7 of 25 This test: 25 point(s) This question: 1 point(s)
The dummy variable trap is an example of:
perfect multicollinearity.
imperfect multicollinearity.
something that does not happen to university or college students.
something that is of theoretical interest only.

Please give me the full answer and make sure your answer is correct Consider the labor market for halrstyllists In two small towns, each with only one hair salon, such that the owners of the salons have monopsony hiring power for hairstyllsts. The following graphs depict the labor supply, marginal expense of labor ( \( M E_{L} \) ), and labor demand in these markets.Complete the following table with the profit-maximizing quantity of labor each salon will hire, along with the wage it will pay for each hour of labor.In Town 1, the salon pays a wage that is _ \( r \) the marginal value product of the final unit of labor hired, whereas In Town 2, the wage is . the marginal value product of the final unit of labor hired.The outcome in Is farther from that of a competitive market, given that the supply of labor is elastic (at the market equillibrium) with respect to changes in the wage.
Answer
General rule for a monopsonist: choose employment where marginal expense of labor (ME_L) equals the value of the marginal product of labor (labor demand, MRP). The wage paid is the corresponding value on the labor supply curve at that employment level. Because the supply curve lies below ME_L for a monopsonist (except in the perfectly elastic case), the wage paid is typically less than the marginal value product at the chosen employment level.
Town
Profit-maximizing quantity of labor (Q*)
Wage paid (W*)
Relation of W* to marginal value product (MRP at Q*)
How far from competitive outcome
Town 1
Q1 = the quantity where ME_L intersects labor demand (MRP). (This is less than the competitive quantity.)
W1 = the wage given by the labor supply curve at Q1.
W1 < MRP at Q1 (wage is less than the marginal value product). Farther from the competitive outcome because the supply curve is relatively inelastic (so the monopsonist can reduce employment substantially below the competitive level and pay a much lower wage). Town 2 Q2 = the quantity where ME_L intersects labor demand (MRP). (This is higher than Q1 and closer to the competitive quantity.) W2 = the wage given by the labor supply curve at Q2. If the supply is highly elastic (near horizontal), W2 ≈ MRP at Q2; in other words, the wage is equal to (or much closer to) the marginal value product. Closer to the competitive outcome because the supply is elastic, so the monopsonist’s distortion is smaller and the wage and employment are nearer the competitive levels. Summary: For both towns the monopsonist hires where ME_L = MRP and then pays the wage given by the supply curve at that employment. In Town 1 the wage is less than the marginal value product and the outcome is farther from the competitive benchmark (supply is inelastic). In Town 2 the wage is much closer to (or equal to, if supply is perfectly elastic) the marginal value product and the outcome is closer to the competitive market.

5. Problems and Applications Q4Consider the market for mobile applications, smartphones, and conventional phones.
For each pair, identify whether they are complements or substitutes:
Pairs of Goods and Services
Complements
Substitutes
Mobile applications and smartphones
Mobile applications and conventional phones
Smartphones and conventional phones
Suppose a network externality reduces the cost of developing cell phone applications. Show the effect of this change on the market for cell phone applications. Next, show the effect the previous change in the market for cell phone applications has on the market for conventional phones. Finally, show the effect the previous change in the market for cell phone applications has on the market for smartphones.