Reference no: EM13971991
Suppose a firm uses both labor L and capital K as inputs to production. Itsproduction function is of the Cobb-Douglas form, i.e.F(K, L) = K13 L23The firm charges a price P for every good it sells, pays a nominal rental rateR to every unit of capital it hires and pays a nominal wage W to every unit oflabor it hires.
1. Express the firm's real revenues, real costs and real profits in terms of thevariables defined above.
2. Assume the firm operates in goods markets, capital markets and labormarkets that are perfectly competitive - that is, it takes P , R and W asgiven. Derive two conditions that will need to hold in order for the firmto maximize its profits ( Set the partial derivative of profits with respectto L equal to zero and the partial derivative of profits with respect to Kequal to zero).
3. The first of these conditions should include the real wage rate WPas wellas K and L. This is the labor demand equation. The second conditionshould involve the real rental rate of capital RPas well as K and L. This isthe capital demand equation. Let us assume that labor is fixed L = 8 andfocus on the capital demand equation. Plot the capital demand functionwhen L = 8 (Show at least three points of the curve).
4. Suppose the supply of capital is inelastic and given by Ks = 27. Plot thecapital supply line on the same graph as the capital demand curve. Findthe real rental rate of capital that clears the market and show it on thegraph.5. How many goods will that firm produce?
|
Are you able to keep pace with the work required
: Reflect on the progress that you have made in regard to your capstone project and presentation. Are you able to keep pace with the work required
|
|
Under what circumstances would duration equal maturity
: We have the Goncalves par bond paying a coupon rate of 8% and having a maturity of 20 years. If the coupon rate of Goncalves were to alter to 4%, what would the new duration be? What is the meaning of duration? Under what circumstances would duration..
|
|
Half sales office and half business office users
: Create a 1-page network diagram showing the components and devices needed to build a simple office network based on the following scenario: 50 employees, half Sales office and half Business office users
|
|
Permanently restricted and temporarily restricted net assets
: What is the traditional name for this statement? What is the purpose of this statement? What are the main sections of this statement? Discuss the difference between permanently restricted and temporarily restricted net assets.
|
|
Express the firm real revenues, real costs and real profit
: Suppose the supply of capital is inelastic and given by Ks = 27. Plot thecapital supply line on the same graph as the capital demand curve. Findthe real rental rate of capital that clears the market and show it on thegraph.5. How many goods will t..
|
|
Accrual of accounting differ from cash basis of accounting
: What is the purpose of this statement? Where in the financial statements would there be important explanatory information? In what financial statement would one identify the purchase of long-term investments? How does the accrual basis of accounting ..
|
|
What does the intercept mean now
: Regress Conflict on coital frequency, female's age, and number of children. Using the couples dataset. a. Interpret all b's and the intercept. What does the intercept mean now
|
|
Do electronics hinder children achieving better education
: Create an Annotated Reference list that coincides with your research topic. My research topic is: Do electronics today hinder children from achieving a better education and development? This assignment will require you to create an APA reference e..
|
|
Operations of not for-profit health care organizations
: The following questions relate to the statement of operations of not for-profit health care organizations. What is the analogous for-profit statement called? What are the main sections of the statement of operations? What are revenues, gains, and oth..
|