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1) Futons Inc. produces futons using only two inputs – capital (wood, nails, and hammers) and labor (measured in worker hours) – with a technology characterized by the following function:q = 2ln(K + 3L)Futons Inc. spent $100 on 100 units of capital at the beginning of the period. They can neither purchase nor sell units of wood, nails, and hammers until the end of the period, but the material does not lose any value over time.
a) Solve for the average product of labor and the marginal product of labor.
b) Assuming that futon makers earn a wage of $9 per hour and the prevailing interest rate in the economy is 10 percent, solve for short run costs as a function of the numbers of futons produced.
2) Suppose the recent recession led to a drop in wages such that the price of labor fell by 25 percent. Economists predict that this drop will be sustained in the long run. Furthermore, the user cost of capital has not changed, nor is it predicted to. How does this change in relative prices affect a firm’s long run expansion path? Please explain using both words (i.e., economic intuition) and a graph.
Tom owns a winery which produces red wines. He is a profit maximizing, pricetaker. The market price for a bottle of red wine is $40. His costs are given by C = 0.1Q^2 + 20Q + 100 where Q represents the number of bottles. How many bottles will he prod..
Suppose that the CIP holds. Suppose that dollar and euro 1-month interest rates are equal at 5%. The current spot rate in 1$/euro. What is the one month forward exchange rate?
Suppose you have a demand function given by: Q = 360 ? 2P. What is the price elasticity of demand when the price is P = $20? You will have to use the point elasticity formula.
A market has a demand curve described by P=26-Q, a supply curve described by P=10+Q, and a price ceiling of 12. Calculate the Total Surplus of the market with the price ceiling.
What is the effective rate of protection for the automobile industry in country A, if there is a tariff of 25 percent on imported automobiles and a tariff of 50 percent on imported inputs used in this industry.
After you became “Minister of Accounting” in Freedonia, The BRICK Company established a Freedonian subsidiary known as Little Bricks. Under your leadership, the Freedonian economy did well and inflation was not a problem so The BRICK Company reported..
Explain how each of the following variables will be affected by proposed steps that you have identified in the first part of the discussion: money supply, interest rates, inflation rate, aggregate demand, and output. Provide support for your respo..
The table illustrates the demand and supply schedules for television sets in Venezuela, a "small" nation that is unable to affect world prices. Draw a separate diagram. Again I want the change in Consumer surplus, change in producer surplus, change i..
Illustrate what is the theoretical differences between ordinary demand functions and compensated demand functions.
Elucidate any of the assumptions required for the Coase Theorem likely to be violated in an important way.
Opportunity cost is defined:
Citizens can protect themselves in the case of robberies or harm by using these guns. Other states do not allow citizens to carry handguns
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