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Consider the following technology F(K,L) = (AK^?)(L^(1??)) where K is the level of capital, L is the level of labor or hours worked, A is a efficiency parameter and ? (0, 1)
(a) Write down the firms problem in the long-run. Note the price for capital and labor are respectively, r and w. (Normalize the price of output to be 1 so that w and r are in real terms).
(b) Does this production function depict constant return to scale? Prove it.
(c) What are the marginal productivities of capital and labor? Are they decreasing in each factor?
(d) What is the labor share and capital share of output?
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Assume that a national restaurant firm called BBQ builds 20 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $300,000 of equipment and furnishings
The diesel-powered generator with a cost of $60,000 is expected to have a useful operating life of 50,000 hours. The expected salvage value of the generator is $8,000. In its first year, the generator was operated for 5,000 hours.
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Consider the short-run situation of a market with three identical firms producing homogeneous outputs. Each firm's total cost function is C(q) = (1/2)q2, where q 0 is a possible output. Market demand is given by Q(p) = 2-2P a. Find the best respon..
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One of life's great lessons is to start early and save all the money you can! If you save two dollars today and two dollars each and every day thereafter until you are 60 years old, how much money will you accumulate
Assume that workers, employers and investors all believed that inflation in the coming year would equal the annualized rate of inflation experienced in the past 6 months. Also assume that workers had been receiving nominal wage gains of 5% during ..
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