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Consider the expanding input variety model of Section 13.1 with one difference. A firm that invents a new machine receives a patent, which expires at the Poisson rate ι. Once the patent expires, that machine is produced competitively and is supplied to final good producers at marginal cost.
(a) Characterize the BGP equilibrium in this case and show how the growth rate depends on ι. [Hint: notice that there will be two different machine varieties supplied at different prices.]
(b) Characterize the transitional dynamics. [Hint: show that the growth rate of consumption is constant but output growth is not.]
(c) What is the value of ι that maximizes the equilibrium rate of economic growth?
(d) Show that a policy of ι = 0 does not necessarily maximize social welfare at time t = 0.
What are teh amin advantages of probit and logit models over linear probability models (LPM)?
Suppose that individual demand for a product is given by QD = 8000 - 10P. Marginal revenue is MR = 800 - 0.2Q, and marginal cost is constant at $20. There are no fixed costs. The firm is considering a quantity discount. The first 300 units can be ..
Identify the incentives to produce and price the product for a traditional monopoly and natural monopoly. Is it best for society, i.e., does society receive more welfare, to have natural monopolies provided by a private firm or by the government.
Let F : R -> R be a strictly increasing function. If the utility function u* is de ned by u*(x) = F(u(x)) what are the Hicksian demand functions generated by u*(answer in terms of h(p; u) and e(p; u)). How are the expenditure functions related
if real GDP in 2002 were $10,048.8 billion and nominal GDP in 2002 were $10,049.6 billion calculate the percentage change from 2001 to 2002 in nominal GDP, real GDP and price level. What is the value of the GDP deflator in 2002
In 2010, many unskilled workers in the United States earned the federal minimum wage of $7.25 per hour. By contrast, average earnings in 2010 were about $22 per hour, and certain highly skilled professionals, such as doctors and lawyers.
To evaluate the two projects, you decide to use the company's weighted average cost of capital (WACC) for the less risky project (12 percent) and the WACC plus two points (14 percent) for the more risky project.
Use a model with horisontal productdifferentiation. Suppose that two firms compete. They are situated at opposite sides on a linje with length 1. Firm 1 in point 0, and firm 2 in point 1. The konsumers transport costs are linear in the distence to..
Major overhaul expenses of $5,000 each are anticipated for a large piece of earthmoving equipment. The expenses will occur at EOY four and will continue every three years thereafter up to and including year 13.
A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a y..
Eisner's bonus was $2.6 million in 1996 and $6 million in 1987. Including the stock options he exercised, his compensation in 1988 was about $41 million, a record at that time for any U.S. executive. In 1993, his total compensation was about $202 ..
Assume the point elasticity method. A 10 percent increase in income brings about a 15 percent decrease in the demand for a good. What is the income elasticity of demand and is the good a normal good or an inferior good
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