Dilip Mookherjee Solutions to Problem Set
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چکیده
In Year 1, there are only ten factories, which can employ a maximum of 100 workers. Hence most farms will still have all five siblings working there. The total farm income will be $100, so the average product of labor is $20 = 100 5 . The marginal product is 0, since when there are at least three siblings working on the farm, any additional worker does not increase farm income. Consequently two out of five siblings do not contribute anything incrementally to farm income; the proportion of rural labor force which is surplus is 40%.
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