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Dirt Diggers (DD) is an excavating firm that excavates roadside ditches for laying drainpipe. Its output follows the following production function:
Q = 10L - .1L2
where L denotes labor hours and Q the length of the ditch in meters. DD hires labor at the going wage rate of $16 per hours.
(a) DD has received an offer to excavate 250 meters for a lump sum price of $700. Should it accept the offer? Explain with appropriate calculations.
(b) Suppose instead of the previous offer DD is offered as much or as little excavation work at a price of $2.00 per meter dug. Should it accept the offer? If it does, calculate its profit and the optimal (profit maximizing) output (meters dug) and labor usage.
Assume increase in government spending. Would the effect on AD be larger if the Fed held MS constant in response or if the Fed were committed to maintaining a fixed interest rate?
Consider the economy of Lewisville, which is just beginning to industrialize. The economy was entirely reliant on corn production until now. There are 100 identical families each farming their own land. Each family has 6 members who participate equal..
You need both equations and clearly labeled graphs (separate graphs for each question) to answer the following questions. Assume that b=1/2 and that initially the real interest rate is equal to the marginal product of capital at 3%. How much will thi..
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For each event given below, respond to the following points using the determinants of demand and supply: Determine whether demand or supply changes or if the event instead causes a change in quantity demanded or quantity supplied. State whether the c..
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A buyer values a house at $525,000 and a seller values the same house at $485,000. If sales tax is 8% and is levied on the seller, then what would be the lowest price that the seller would be willing to sell at?
Find the following values for a lump sum assuming annual compounding: The future value of $500 invested at 8 percent for 1 year. The future value of $500 invested at 8 percent for 5 years. The present value of $500 to be received in 1 year when the o..
A refrigerator sold for $500. The store financed the refrigerator by charging 0.5% monthly interest on the unpaid balance. If the refrigerator is paid for with 30 equal end-of-month payments:
Assume that there are 10 million workers in Canada also that each of these workers can manufacture
Maintenance on a machine is expected to be $155 at end of the first year then increasing by $35 each year for the next 7 years. What sum of money would need to be set aside now to pay for the maintenance for the 8 year period? Assume 6% interest.
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