2023 Econ 412 Fall 2015 Problem Set 1 1 50 points Follow the instructions delivered in class | Assignments Online

Econ 412 – Fall 2015
Problem Set 1

1. (50 points) Follow the instructions delivered in class for this part.
Janet Yellen, the Chair of the Federal Reserve, is to testify before Congress on the
recent trends in the labor market. She has hired you as her consultant. She gave
you a spreadsheet with information on basic labor force statistics in the United States
from 1948 to 2015. The first column indicates the date, and the remaining columns
represents each variable.
Here is a snapshot of the file.
Figure 1: Snapshot of the Excel file
She wants you to use this information to plot the following figures (x-axis time, y-axis
the variable of interest). To get full credit for your work (and you want to be cited
before the Congress), add on each graph your last name with a legend (example,
YourLastName, 2015).
(a) Plot the labor force participation rate from 1948-2015 (x-axis time, y-axis the
labor force participation rate). Is it true that the labor force participation rate
has been increasing over time?(10 points)
(b) Plot the female labor force participation rate from 1948-2015 in a figure. Is
the statement that more females are joining the labor force true?(10 points)
(c) Plot the male labor force participation rate from 1948-2015 in a figure. Are
more men joining the labor force? (10 points)
(d) Plot the female unemployment rate and male unemployment rate on the
same graph from 1948-2015 in a figure. Is it true that the unemployment rate
is usually higher for females? (20 points)
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2. (20 points) Hillary’s preference for consumption and leisure is given by U(C, L) =
(C −200)(L−80) so her marginal utility of leisure MUL = (C −200) and her marginal
utility of consumption is given by MUC = (L − 80). There are 168 hours available in
the week to split between work and leisure. She earns 5 dollars per hour after tax. She
also receives 320 dollars worth of welfare benefits each week regardless of how much
she works.
(a) Graph Hillary’s budget line.
(b) What is Hillary’s marginal rate of substitution when L=100 and she is on her
budget line?
(c) Find Hillary’s optimal amount of consumption and leisure (hint: MRS=w).
(d) What is Hillary’s reservation wage?
3. (15 points each) Problems from Chapter 2, Questions 2.3, 2.4.
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