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Suppose a firm’s production function is: f(E,K) = 40K0.25E0.75 The corresponding marginal product functions are: MPK = 10K-0.75E0.75 and MPE = 30K0.25E-0.25 Suppose initially that the hourly wage is $9 and the price of each unit of capital is $15.
a. If the firm is maximizing profits, what is the firm’s optimal capital-labor ratio?
b. If the firm has hired 25 machines and 50 workers, is it maximizing profits? Why or why not?
c. If the price of labor increases to $15 and the firm increases its capital stock to 12 units from 10 units, how many workers will the firm choose to hire? Does the scale or substitution effect dominate in this case?
Suppose a competitive market consists of identical firms with a constant longrun marginal cost of $10. (There are no fixed costs in the long run.) Suppose the demand curve at any price, P, is given by Q = 1000 ? P.
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Ann’s preferences are represented by a utility function UA(x). Suppose one were to (coloquially) say that Carol has more “sensitive preferences” than Ann: her utility function UC (x) satisfies UC (x) = 2UA(x). Prove that for every choice set, Ann and..
q1. discuss one recent price change that you have noticed while visiting your local supermarket. determine whether or
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The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists.
You run a chain of movie theaters, so you commission a marketing study that categorizes your potential customers into 10 equal-sized groups according to what they’re willing to pay for a movie ($10, $9, $8, $7, $6, $5, $4, $3, $2, $1). What price sho..
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What are the major institutional changes that take place with economic development? Are these institutional changes causes or mere correlations of growth? Or is growth a cause of institutional change?
Frank is the receiving dock supervisor for Cabinet Co., a company that manufactures metal storage cabinets. His job is to supervise the inspection, and stocking of components and materials used in the manufacture of the cabinets as they are delivered..
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