Justify your answer. 5. The minister of Agriculture claims: "during the last years we improved our technology of Agriculture production while the industry's technology experienced no change". The statistics evidence shows that the agriculture production was fixed during these years while the productivity of the industry has grown. Explain this result using the PPF model. 6. When all of the factors of production are used (machine and workers for example), the
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[5 pts. each] According to the neoclassical theory of distribution, the real wage earned by any worker equals that worker’s marginal productivity. Let’s use this insight to examine the incomes of two groups of workers: farmers and barbers. [a] Over the past century, the productivity of farmers has risen substantially because of technological progress. According to the neoclassical theory, what should have happened to their real wage? [b] In what units is the real wage discussed in part [a] measured? [c] Over the past period, the productivity of barbers has remained constant. What should have happened to their real wage? [d] In what units is the real wage discussed in part [c] measured? [e] Suppose workers can move freely between being farmers and being barbers. What does this mobility imply for the NOMINAL wages of farmers and barbers? [f] What do your previous answers imply for the price of haircuts relative to the price of food? [g] Who benefits from technological progress in farming–farmers or barbers?
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