Economics 3 Chapter 11 Class Exercise 1. If someone offers topayyou$1,200 inth r

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Economics 3 Chapter 11 Class Exercise 1. If someone offers topayyou$1,200 inth ree years and the going interest rate is 4% what is 2. If the wages of the employees at Nike increase by 25% and the quantity of labor demanded 3. When the labor supply curve is positively sloped, the_effect dominat 4. The the present value for this future payment? decreases by 10%, what is the elasticity of the demand of labor? higher wages lead to salary is $300,000 per year. The demand curve for astronauts will probably be hours worked. cost of sending a space shuttle into orbit is $4 billion. Total cost for the astronaut's 5. Suppose an individual is receiving $17,500 per year for a piece of land and the interest rate 6. George found out that he can purchase an asset that is guaranteed to pay $875 in a single 7. Suppose the postal service in a small city plans to hire an additional mail carrier at a wage elastic/inelastic/unitary elastic. is 796, what is the present value of that land? payment in five years. If the interest rate is 5%, the present value of the future payment is: rate of $20 per hour. Currently, this city employs 10 mail carriers at $19 per hour. The marginal factor cost of hiring the 11th mail carrier is_per hour. 8. (Figure below) A competitive firm hiresworkers and pays them-wage. What will the competitive firm in the product market that is a monopsonist in the input market (as shown in the figure) set as its amounts for labor and wages? The key lesson to remember about wages in the competitive labor market is that competitive input (factor) markets are the precisely the value of their marginal products and the highest employment results. This translates into the prices for consumers at the output, assuming efficient production. 9. efficient, since inputs in these markets are paid

Explanation / Answer

(1) Present value ($) = 1,200 x PVIF(4%, 3) = 1,200 / (1.04)3 = 1,200 x 0.8890 = 1,066.8

(2) Elasticity of labor demand = % Change in quantity of labor demanded / % Change in wage = - 10% / 25% = - 0.4

(3) When labor supply curve is positively sloped, Substitution effect dominates, and higher wages lead to Higher number of hours worked.

(4) Demand curve will probably be Inelastic.

Since the cost of hiring an astronaut comprises a very small proporiton of the cost of sending a space shuttle, demnd for astronauts will be less responsive to a change in cost of hiring astronauts, so demand for astronaus will be relatively inelastic.

(5) Present value of perpetuity = Annual income / Interest rate = $175,000 / 0.07 = $2,500,000

NOTE: As per Chegg answering guidelines, first 5 questions are answered.

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