Discuss a firm that uses both labor-capital in production

Assignment Help Microeconomics

Reference no: EM133253785

Assignment:

1. Many states use the Investment Tax Credit (ITC) as a way to encourage businesses to invest in new capital equipment. Through the ITC, firms can reduce their tax burden by buying new capital equipment. This effectively reduces the price of capital goods.

2. Discuss the situations under which the employment effects in a given industry will be larger.

3. Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is $15 per hour. Draw the firm's isocost line assuming a total production cost of $150.

4. Suppose that the ITC reduces the price of capital by 10% to $18 per unit. In which direction does the substitution effect change the firm's desired employment level and capital stock?

5. In which direction does the scale effect change the firm's desired employment level and capital stock?

6. If capital and labor are complements, which effect is stronger in terms of changes in the demand for labor in response to the ITC, the scale effect or the substitution effect?

Reference no: EM133253785

Questions Cloud

Read an excerpt from athenian historian thucydides history : Read an excerpt from Athenian historian Thucydides' history of the Peloponnesian War in Greece, often referred to as Pericles' Funeral Oration.

Examples of movements along demand and supply curves : Identify and explain two factors from the article that shift the demand curve and the direction of the shifts.

Relationship between economic growth rate-unemployment rate : Why are resources no longer the most important indicators of economic growth disparity among countries?

Why have some nations prospered so well while have failed : Why have some nations prospered so well while others have failed? What causal variables are to be considered in facilitating prosperity?

Discuss a firm that uses both labor-capital in production : Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is $15 per hour.

Identify variables that could be used to predict demand : Macroeconomic variables that might impact demand and/or supply in the industry. A good place to start would be the list of economic indicators.

Discuss the fed main monetary policy actions to crisis : Consider the FED's main monetary policy actions to address the crisis. Were they inspired by the classical or Keynesian paradigms?

Explain the efficiency wage model : Explain why the Efficiency Wage model is able to deliver the (new) Keynesian result that money is not neutral in the short run while also addressing criticism.

Describe australia political system : Describe how Australia's political system has influenced sport governance in Australia. Provide examples and explain.

User Account

All Pages