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(U) and briefly explain your answer.
(a) If bread is produced by using a constant returns to scale (CRS) production function,
then if the number of workers doubled, twice as much bread will be produced.
(b) A competitive, prot-maximizing rm hires capital until the marginal product of labor
(MPL) equals money wage (W).
Y = F(K,L) = K^0.3L^0.7
(a) Does this production function have constant returns to scale (CRS)? Why?
(b) What is the marginal product of capital (MPK)?
(c) What is the marginal product of labor (MPL)?
(d) Use your answers in (b) and (c) above to show that this production function displays
diminishing marginal product (DMP).
(e) Are K and L "complements"? Explain in some detail.
(f) What is the capital share?
(g) When capital per worker rises, what happen to labor share of national income?
(a) Graph the production function holding K constant.
(b) Graph the MPL curve with MPL on the vertical axis and L on the horizontal axis. Is
<Table 1: Output, Labor, and MPL>
L Y MPL
0 0 -
1 5 5
2 9 ()
3 () 2
4 12 1
real rental price of capital (r) of each of the following events.
(a) A wave of immigration increases the labor force.
(b) An earthquake destroys some of the capital stock.
2. Do you expect next year’s demand to be so large that there will be a labour shortage or do you expect output to be so small that there will be unemployment?
3. I see that the National Institute has forecast unemployment on the basis of unchanged government policies. If this is the case, it is imperative that we adopt a policy to produce full employment next year.
4. It seems to me that we have to choose between increasing government expenditure or reducing taxations. We should choose the option which causes the smaller increase in the budget deficit.
5. You will of course ensure that the attainment of full employment does not run us into a balance of payments deficit.
explain using elasticity of demand why a train company might introduce a policy of raising fairs at busy travel time and lowering fairs at less busy travel times
y ), are described by the utility function U(x; y ) = xy +2x. Billy's corresponding marginal
utilities are, MUx = y + 2 and MUy = x:
Use Px to represent the price of milk, Py to represent the price of coffee, and I to represent
Question 1: Derive Sally’s demand for coﬀee as a function of the variables Px, Py and I. (i.e. Do NOT use the numerical values for Px, Py and I, from question 1.) For the purposes of this question you should assume an interior optimum.
Question 2: Derive Sally’s demand for milk as a function of the variables Px, Py and I. (i.e. Do NOT use the numerical values for Px, Py and I, from question 1.) For the purposes of this question you should assume an interior optimum.
A) What must the CFO have expected about change in the value of the British pound over the year to believe in March, 2016 that investment in 1year US CD’s would be more profitable than investment in British CD’s.
(You need not supply a specific numerical answer in this part. Simply identify the direction of change in the pound’s value that the CFO was expecting.)