Draw the old and new isocosts lines

Assignment Help Business Economics

Reference no: EM131005995

Suppose we now care about the long run decisions of a firm that has a production function of the form q = 4L^1/2 + K

Suppose w = 1 and r = 0.5

Assume that, at the beginning when w0 = 1 and r = 0.5, the firm chose to produce q0 = 20 units of output. Then, the wage increased to w1 = 2 and in consequence the firm chose to produce q1 = 10 units of output.

(a) Calculate the optimal choices of labor and capital after the wage change.

(b) Draw the old and new isocosts lines

(d) Calculate the substitution effect

(e) Calculate the elasticity of substitution

Reference no: EM131005995

Questions Cloud

What is the maximum amount the money supply can increase : A bank currently has $70,000 in deposits, $6,000 in cash in the vault, $12,000 on deposit with the Fed, and $7,000 in government securities. The required reserve ratio is 20 percent. What is the maximum amount the money supply can increase, assuming ..

What will be the effect of the lease on ward : Ward also paid a $100,000 advance payment at the lease's inception. What will be the effect of the lease on Ward's earnings for the first year (ignore taxes)?

Real exchange rate-market basket of goods and services : A market basket of goods and services that costs $100.00 in the United States costs 800 pesos in Mexico, and the current nominal exchange rate is 10 pesos per U.S. dollars. The real exchange rate now if today’s price index in both countries is 100?

Provides information about the wireless antenna strength : Which tool, Wireshark or NetWitness, provides information about the wireless antenna strength during a captured transmission

Draw the old and new isocosts lines : Suppose we now care about the long run decisions of a firm that has a production function of the form q = 4L^1/2 + K. Assume that, at the beginning when w0 = 1 and r = 0.5, the firm chose to produce q0 = 20 units of output. Then, the wage increased t..

What are the x and y coordinates of the given object : What are the x and y coordinates of this object 2 seconds after the string is cut? Be accurate to one decimal digit and include units.

Calculate the yield to maturity for each of the bonds : Three zero-coupon bonds with face values of $10,000 are currently selling for the following amounts Bond Years to Maturity Price A 1 $9804 B 2 $9427 C 3 $8978 a. Calculate the total dollar return from buying each bond today and holding it until matur..

Evaluate short-run-long-run consequences of bush tax cuts : The CBO in 2003 and 2013 used dynamic scoring models to evaluate short-run and long-run consequences of Bush tax cuts and stimulus spending of the recent recession. Explain the findings or conclusions the CBO arrived at?

The first payment was made at the commencement : The first payment was made at the commencement of the lease. What will be the amount Corinth will record as a net residual asset (before adding deferred gross profit) at the commencement of the lease? Why?

User Account

All Pages