Gce Model Questions Vol1 2018 Economics Question 16

Practice objective / multiple choice question 16 from the 2018 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2018 Economics Objective / Multiple Choice Hard Difficulty
Question 16 GCE_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • objective

A developing economy has two sectors. Agriculture produces output \(Q_A = 100 L_A^{0.5}\) and manufacturing produces output \(Q_M = 50 L_M^{0.7}\), where \(L_A\) and \(L_M\) are the numbers of workers employed in each sector. The total labour force is 200 workers and wages are equal to the marginal product of labour in each sector. Determine the equilibrium wage (to two decimal places) and the allocation of labour between the two sectors.

Answer Options

A. Equilibrium wage ≈ £7.00; labour allocation: \(L_A \approx 48.0\) workers in agriculture, \(L_M \approx 152.0\) workers in manufacturing.
B. Equilibrium wage ≈ £6.50; labour allocation: \(L_A \approx 55.0\) workers in agriculture, \(L_M \approx 145.0\) workers in manufacturing.
C. Equilibrium wage ≈ £8.20; labour allocation: \(L_A \approx 35.0\) workers in agriculture, \(L_M \approx 165.0\) workers in manufacturing.
Correct Answer D. Equilibrium wage ≈ £7.68; labour allocation: \(L_A \approx 42.5\) workers in agriculture, \(L_M \approx 157.5\) workers in manufacturing.
Correct Answer
D
Correct Option:
Equilibrium wage ≈ £7.68; labour allocation: \(L_A \approx 42.5\) workers in agriculture, \(L_M \approx 157.5\) workers in manufacturing.

About This Question

This is Gce Model Questions Vol1 2018 Economics Question 16. It is one of the objective questions from the 2018 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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