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Suppose a firm uses both labor L and capital K as inputs to production. Its production function is of the Cobb-Douglas form, i.e. F (K,L) = K^1/3 L^2/ 3.The firm charges a price P for every good it sells, pays a nominal rental rate R to every unit of capital it hires and pays a nominal wage W to every unit of labor it hires. (a) Express the firm’s real revenues, real costs and real profits in terms of the variables defined above. (b) Assume the firm operates in goods markets,capital markets and labor markets that are perfectly competitive - that is, it takes R/P and W/P as given. Derive two conditions that will need to hold in order for the firm to maximize its profits ( Set the partial derivative of profits with respect to L equal to zero and the partial derivative of profits with respect to K equal to zero). (c) The first of these conditions should include the real wage rate W/P as well as K and L. This is the labor demand equation. The second condition should involve the real rental rate of capital R/P as well as K and L. This is the capital demand equation. Let us assume that labor is fixed L = 8 and focus on the capital demand equation. Plot the capital demand function when L = 8 (Show at least three points of the curve). (d) Suppose the supply of capital is inelastic and given by K^S = 27. Plot the capital supply line on the same graph as the capital demand curve. Find the real rental rate of capital that clears the market and show it on the graph. (e) How many goods will that firm produce?
briefly explain the probable effects of the screenwriters’ wage increase on: Equilibrium price, equilibrium quantities, and total revenues in the movie and popcorn markets.
Consumption is $6 trillion, investment is $2 trillion and government purchases are $2.5 trillion. The country exports $1 trillion and imports $1.5 trillion. Find net exports and solve for the level of aggregate demand.
q1. the government of new holland is experiencing lower energy costs due to new technology in extracting energy sources
Find out data on wages, employment, and minimum wage laws in developing countries from the internet & summarize this information.
Suppose the US dollar depreciates against other currencies. Under the linked exchange rate system, Hong Kong pegs its nominal exchange rate to the US dollar. What would happen to the prices of goods and services (in terms of US dollars) in Hong Kong ..
Illustrate what occurs to consumer also producer surplus when the sale of a good is taxed
Most members of labor unions work in the public sector, industries that are regulated, or industries in which production is concentrated into a few firms.
JET FAB bought a CNC laser cutting machine at a cost of $400,000 to meet the specific needs of customer that had given a 4-year contract with the possibility of extending the contract for another 4 years. Consequently, the company ended up selling th..
Justify your answer using at least two analytical techniques and presenting the information graphically.
As an owner of a visible U.S. business that is valued in the community, you are making a final decision regarding the international aspects of a business decision, and you decide to set up a table with various risks.
Illustrate what are major arguments in case for income equality. Illustrate what are major arguments in case for income inequality.
The company you work for recently has committed itself to implementing a program of social responsibility. After the company has gotten the commitment of top executives, planned the program, and appointed a program director, you suggest that a (n) __..
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