Suppose the marginal product of labor is MPN = 200 - 0.5N where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. What is the equilibrium quantity of employment?
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Explanation:
MPN = 200-0.5N
aggregate supply = 300+8w
At equilibrium w= MPN
W= 200-0.5(300+8w)
W= 200- 150-4w
4w+w = 200-150
5w = 50
w = 10
substitute value of w= w = 200 - 0.5N
W = 200 - 0.5N
10 = 200 - 0.5N
200-10 = 0.5N
190 = 0.5N
N = 190/0.5
N= 380
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