ECON 302 University of California Los Angeles Intermediate Macroeconomics Exercises

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1. [5 points] The following questions refer to the production function (chapter )
   1. Draw the production function (with N on the x-axis) as discussed in class.
   2. Define the MPN (i.e. provide an intuitive definition of the marginal product of labor) andillustrate it on the diagram above (i.e. you want to show that MPN can also be draw directly onthe production function).
   3. Why does the production function become flatter as the input rises? Explain.
   4. DrawtheMPNcurve.WhathappenstoMPNasNfalls?Juststate:RISE,FALLS,orSTAYSUNCHANGED.
   5. Suppose that the production function of a Firm is NOT Cobb-Douglas, but instead looks likethis: Y = 0.2 (K + N0.5). Use calculus to derive the MPN.
2. [5 points] Analysis: Suppose that congress votes on major deregulation of key US industries.
   1. Discuss intuitively how the decrease in regulations affects production and Labor demand, providingeconomic reasoning (intuition). (note: simply stating the impacts without providing reasoning willnot yield full points).
   2. Continue with a). Use a diagram to illustrate the impact of a fall in regulations (i.e. deregulation) onproduction and output, & on the labor market (and hence the equilibrium real wage and theequilibrium full-employment). Label all axes and all curves!

Extra Credit: (2 points) Complete the week 3 activity on AUTOMATION (see iLearn) and submit it alongwith the rest of the assignment by February 20th. (Note, to have this activity count towards participation, youmust submit it separately on iLearn).