Reference no: EM131009717
Alice owns a firm which produces oranges. Alice needs only two types of inputs which we call capital denoted by K and labor denoted by L. Price of capital i.e. the rental rate is r and price of labor i.e. wage rate is w. Each orange sells for p dollars per unit. The technology available to Alice can be represented by the following Cobb Douglas production function f (K, L) = KaL b , where a, b are positive. He chooses a combination of output, labor and capital denoted by y, L and K respectively to maximize profits. Marginal product of labor MPL = bKaL b−1 and marginal product of capital is MPK = aKa−1L b
1. Write down the profit maximization problem faced by Alice’s firm
2. What conditions should Alice’s chosen bundle i.e. (y, K, L) satisfy
3. Solve for the optimal K and L in terms of (a, b, p, w, r)
4. Solve for optimal y in terms of (a, b, p, w, r
|
Define the rivalness ratio of a good in a way
: Define the rivalness ratio of a good in a way that could be understood by someone who has taken principles of microeconomics course, but has not studied any other economics. Explain how we can tell that the rivalness ratio of a good does not depend o..
|
|
Introduced to ten principles of economics
: In the first chapter, we are introduced to Ten Principles of Economics. Which of these principles do you observe in your everyday life? -Which of these principles have you never really thought about before? -Which of the principles are you most curio..
|
|
Comment on changes in categories of expenditure sources
: Comment on the changes in the categories of expenditure sources, i.e., out-of-pocket, health insurance, third party payers, etc. with respect to both year-to-year changes and across the entire period.
|
|
What is the circular-flow model
: What is the circular-flow model? There are two different loops in the circular-flow model. What is the difference between the two loops? Does the circular-flow model describe reality exactly? Describe one way that you or your family interacts in the ..
|
|
Write down the profit maximization problem faced by firm
: Alice owns a firm which produces oranges. Alice needs only two types of inputs which we call capital denoted by K and labor denoted by L. Price of capital i.e. the rental rate is r and price of labor i.e. wage rate is w. Each orange sells for p dolla..
|
|
Moderate-cost abater and a high-cost abater
: Under a strict command-and-control framework, suppose abatement standards are set equally across polluters. Assume the total abatement target is 30 units. Show the cost implications using three graphs, each of a different polluter with a unique MAC c..
|
|
Calculate the inverse demand function-elasticity of demand
: A firm has the exogenous cost function C(Q) = 354Q-30Q^2 + Q^3. Compute the marginal cost function. Compute the average cost function. For the remaining parts, assume that the demand for the firm’s product is D(P) = 25- √P. Calculate the inverse dema..
|
|
Given there is an overwhelming scientific consensus
: Given there is an overwhelming scientific consensus that global warming exists, why do many conservatives (like the Republicans running for President) deny its existence?
|
|
Independently go shopping for dresses for high-school prom
: Three friends (Julie, Kristin, and Larissa) independently go shopping for dresses for their high-school prom. Upon reaching the store, each girl sees only three dresses worth considering: one black, one lavender, and one yellow. Provide the game tabl..
|