q. 14

ex Iues Ion Suppose that the production function is Y: 9 K0'5N0'5. m With this production function, the marginal product of labor is MPN = 4.5 K0'5/ N05. The labor supply curve is NS = 90 x [(1 t) x w]2, where w is the real wage rate, tis the tax rate on labor income, and hence (1 t)x w is the after-tax real wage rate. The capital stock is K = 25. Assume that the tax rate on labor income, t, equals zero. The equilibrium level of the real wage is D (Round your answer to two decimal places). The equilibrium level of employment is D (Round your answer to one decimal place). Now, suppose the tax rate is changed to f= 0.3. Now the equilibrium level of the real wage is D (round your answer to two decimal places). With the tax rate now at t = 0.3, the equilibrium level of employment is D (round your answer to one decimal place)