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Consider an economy with the following Cobb-Douglass production function:
Y=5K^(1/3)L^(2/3)
a. Derive the equation describing labor demand in this economy as a function of the real wage and capital.
b. The economy has 27,000 units of capital and a labor force of 1000 workers. Assuming that factor prices adjust to equilibrate supply and demand, calculate the real wage, total output, and the total amount earned by workers
c. Now suppose that congress, concerned about the welfare of the working class, passes a law setting minimum wage that is 10 percent above the wage you derived in part b. Assuming that congress cannot dictate how many workers are hired at the mandated wage, what are the effects of this law? Specifically, calculate what happens to the real wage, employment, output , and the total amount earned by workers.
Which one of the following is based on the idea that the marginal utility of income diminishes as income increases?
Indicate how each of the following factors will change the individual demand curve for aspirin tablets: An increase in the price of bottle water (a complement)
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On Feb. 12, 2015, you buy a bond that pays a semi-annual coupon of $100 on Feb. 12 (including today) and Aug. 12 until the final coupon payment on Feb. 12, 2018. In addition, the bond will pay $10,000 on Feb. 12, 2018. What is the maximum price you c..
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Illustrate we know about the effects of mandatory seat belt laws, which of the following groups would be most likely to mount a campaign to repeal those laws.
Assume an initial exchange rate where $1 = €1. An American company sells $10 million in goods to a German firm. The American company will receive less than $10 million in revenues if (assume no transactions to prevent exchange rate risk):
You've just won the state lottery and will receive 20 annual payments of $70,000, with the first payment arriving 1 year from today. It is easy for you to borrow or lend on the capital market at an interest rate of 8% per year. If someone offered to ..
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