Assume That a Firm Has a Production Function Y =

question 77

Essay

Assume that a firm has a production function Y = 1,000L^1/2,where Y is output and L is labour.Labour demand is L^d = 250,000(P/W)² and labour supply is L^s = 31,250(W/P).Initially,there is an equilibrium in which output is 250,000,employment is 62,500,the nominal wage is 20,and the price level is 10.Demand for output is 250,000 at the given price,so all output is sold.Suddenly,demand at the given price drops to 200,000,but the firm does not lower its price.It lowers output and lays off workers.a.Assuming that the firm cannot produce for inventory,how much will the firm want to produce?
b.Assuming output equals the amount given under part a,what employment force will the firms want to hire?
c.If the firm continues to pay the same nominal and real wage,how much more labour will workers wish to supply than the firm will want to hire?

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Definitions:

Congenital Deafness

Congenital deafness refers to hearing loss that is present at birth, which can result from genetic factors, abnormalities in the ear's structure, or maternal exposure to certain substances or infections during pregnancy.

Sensorineural

Pertaining to or involving both sensory and neural mechanisms, often used in reference to hearing loss caused by damage to the inner ear or auditory nerve.

Acoustic

Pertains to sound, or the science of sound, including its production, transmission, and effects.

Gestalt Principle

A theory in psychology that proposes the human brain sees objects in their entirety before perceiving their individual parts, emphasizing the whole of anything is greater than its parts.