Simple Econ Help

Greg Bernhardt

There are two islands, cocoa and plantation. There are nearly the same. On both islands people spend 2,000 hours looking for a new job. The difference is that on cocoa from the 2,000 looking for new jobs, 1,000 are looking because of job search and 1,000 are looking due to job rationing and that cocoa set an minimum wage. On Plantation all 2,000 are looking because of job search.

Here are the questions:

1. Which island has the greater potential GDP
2. Which island has the higher Real Wage Rate
3. Which island has the higher natural unemployment.

I'm really at a loss here. My book doesn't explain a whole lot. I'm not sure how job search, job rationing, minimum wage affect those questions. Does anyone have any advice?

Here is what I think:

1. Plantation
2. Plantation
3. Tied

Tom Mattson

Unforuntately, all my Econ books are at my parents' house in IL. What are the basic mathematical definitions of the terms in the problem? If we can reduce this to a math problem, then we might be able to get it solved here.