ECON 307

In Class Exercise Thirteen - Ricardo.

1.  What is the natural price (or wage) of labor?  How does it differ from the market price (wage)? (Short run?  Long run?)

2.  What is Ricardo's wage fund?  What happens if the percentage of the pie that goes to the wage fund increases "too much?"

3.  The demand for labor is a function of what?  The supply of labor is a function of what?

4.  Graphically and in words explain what will happen in the labor market if there is an increase in the demand for labor due to an increase in capital (assume the value of capital does not increase).  Show both the short run and the long run.

5.  Under what circumstances will the natural price (wage) of labor increase "permanently" or in the long run?   Explain (words and graph).

6.  Where does rent come from and why would it change, according to Ricardo?

7.  Explain diminishing marginal returns as it is understood today and how some interpret Ricardo as explaining. 

8.  What does comparative advantage mean?

9.  What caused a stationary state (or economic slump) according to Ricardo?  What are the "steps" to a stationary state (economic slump)?  How does the amount of land available for agricultural production play a role in this process?

10. Any other questions on this material?