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Calculate the domestic rental rate

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Reference no: EM133125883

Suppose the domestic production function is Y=10K0.5L0.5.

We first assume a closed economy. The domestic market has 50 units of labor and 200 units of capital. When oversea capital movement is permitted, 150 units of capital move from home to abroad, until domestic and foreign rental rates are equalized. Please calculate the domestic rental rate r after the capital movement.

Reference no: EM133125883

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