Consider a two-sector economy that employs a total of 105 units of a single input, labor. Nyof these units are allocated to sector 1, where the wage is 90 for the top five workers in that sector and zero for all others. (Both the wage for the top workers and the number who receive that wage are invariant to changes in Ng) The remaining N2 105 - Nj units of labor serve in sector 2, where every worker receives a wage of 10. All workers in sector 1 have an equal probability of being among the top five workers, 6/Ng and all workers are risk neutral. Instructions: Round your answers to the nearest whole number. a. How many workers will work in sector 1? b. What will be the value of GNP for the economy? GNP= c. How would your answers differ if there were a 50% tax on the earnings of workers in sector 1? Workers in sector 1: GNP:

Consider a two-sector economy that employs a total of 105 units of a single input, labor. Nyof these units are allocated to sector 1, where the wage is 90 for the top five workers in that sector and zero for all others. (Both the wage for the top workers and the number who receive that wage are invariant to changes in Ng) The remaining N2 105 - Nj units of labor serve in sector 2, where every worker receives a wage of 10. All workers in sector 1 have an equal probability of being among the top five workers, 6/Ng and all workers are risk neutral. Instructions: Round your answers to the nearest whole number. a. How many workers will work in sector 1? b. What will be the value of GNP for the economy? GNP= c. How would your answers differ if there were a 50% tax on the earnings of workers in sector 1? Workers in sector 1: GNP:

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.8P

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