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Consider a firm which has profits as a function of its capital stock as: Π(K). Suppose there is a cost to investment of the form C(I) = b|I|.Depreciation occurs at rate δ, and the discount rate is r. (a) Derive the conditions for the optimal level of investment.
(b) Suppose the government suddenly decides to reward investment by paying firms τ for each unit of investment they do (where τ b). Assuming we are initially in the steady state, show the path of in- vestment, profits and the capital stock over time.
(c) Answer the previous question assuming that the government an- nounces that the reward will be made at some specified time in the future.
Consider the following firm with the production function Q=F(L)=2L^1/2. L=labor. Wage w=12. Fixed costs are FC=500(sunk cost). Derive the short run cost function. Graph this function using excel.
Which stages of economic growth are distinguished by Rostow and what are their main characteristics? What are the potential advantages of backwardness?
Find out the firm's optimal quantity, price, and profit (1) by using the profit and the marginal profit equations and (2) by setting MR equal to MC. Also provide a graph of MR and MC.
The demand and supply functions of two related goods are given by Qd1 = 30 - 8P1 + 4 P2 ,Qs1 = -60 + 6P1 ,Qd2 = 200 + 4 P1 - 4 P2, Qs2 = -40 + 6P2 - What is the relationship between good one and good two?
Illustrate your answer, explain and interpret the difference between the Slutsky substitution effect and the Hicksian substitution effect.
Explain how GDP would return to equilibrium if it was above or below equilibrium GDP. Whenever there is change in spending, there will be a change in real GDP. Explain why this is so.
Someone claims that the "bargaining" hypothesis appeared in the literature because of a significant flaw in the "comparative advantage" hypothesis. After you briefly explain what these two hypotheses stand for, identify what..
What does this say about the marginal return to labor
A project will cost $50,000. The benefits at the end of the first year are estimated to be $10,000, increasing at a 10% uniform rate in subsequent years. Using an 8-year analysis period at a 10% interest rate. Compute the benefit-cost ratio.
What are the similarities and differences among Title VII of the Civil Rights Act and Executive Order 11246? Make a chart listing similarities and differences among the two including covered employers, penalties for violation, enforcing agencies, and..
A market is initally served by a monopoly firm 'A' with demand given by Q=400-P, and marginal costs given by MC=100. Find the monopoly price and quantitty. Now, a new firm 'B' enters the market, and takes A's initial output as given. Find A's profit ..
How does a decrease in demand for movie tickets affect equilibrium in the market for movie tickets and what is the marginal cost of producing the second car?
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