Consider the labor market in a pre-Neolithic economy. There are three activities: hunting (h), gathering (g)....

 

Transcribed Image Text:

Consider the labor market in a pre-Neolithic economy. There are three activities: hunting (h), gathering (g). and fishing (f). Workers may only be employed in one activity at a time. Each activity produces the same output, food (q). There is no money. There are no other factors of production. Workers are compensated for their efforts in food; hence, the wage is in real terms, i.e. w = activities. The marginal productivity of labor schedules for each activity are as follows: MPL Labor may move costlessly between MPL = 100 Lg MPL=100 - Lf There are L = 630 individuals in the economy, all facing the grim, Hobson's choice of "work or starve." MPL, 100 = - 1 = Employment in each activity Real wage in each activity Lh a. Assuming that workers move to the activity where compensation is the highest, what must be true about equilibrium compensation in each of these activities? b. Does each activity exhibit diminishing marginal product of labor? Explain. c. Find the aggregate labor demand curve for this pre-Neolithic economy. d. What is the level of employment in each activity? e. What is the real wage earned in each activity? f. Suppose that decades of overhunting lowers the marginal productivity of labor scheduling in hunting. Predict what what will happen to: Consider the labor market in a pre-Neolithic economy. There are three activities: hunting (h), gathering (g). and fishing (f). Workers may only be employed in one activity at a time. Each activity produces the same output, food (q). There is no money. There are no other factors of production. Workers are compensated for their efforts in food; hence, the wage is in real terms, i.e. w = activities. The marginal productivity of labor schedules for each activity are as follows: MPL Labor may move costlessly between MPL = 100 Lg MPL=100 - Lf There are L = 630 individuals in the economy, all facing the grim, Hobson's choice of "work or starve." MPL, 100 = - 1 = Employment in each activity Real wage in each activity Lh a. Assuming that workers move to the activity where compensation is the highest, what must be true about equilibrium compensation in each of these activities? b. Does each activity exhibit diminishing marginal product of labor? Explain. c. Find the aggregate labor demand curve for this pre-Neolithic economy. d. What is the level of employment in each activity? e. What is the real wage earned in each activity? f. Suppose that decades of overhunting lowers the marginal productivity of labor scheduling in hunting. Predict what what will happen to:

Answer rating: 100% (QA)

a Assuming that workers move to the activity where compensation is the highest what must be true about equilibrium compensation in each of these activ... View the full answer