Suppose there are 100 firms in the economy. Let us call them firm 1, firm 2, ..., and firm 100. For firm j (j=1,2,...,100) the labor demand (or equivalently MPN) is Nj = 1 - 0.02w where w is the real wage. Note that labor demand function for the whole economy is Nd = N1 + N2 + ... + N100 .
Also suppose the labor supply function for the whole economy is Ns = 40 + 3w .
.a) Find the labor demand function for the whole economy.
.b) Find the equilibrium wage and equilibrium employment in the whole economy.