The nominal interest rate is equal to i=0,04, and the rate of depreciation of capital is d=0,09. The price of capital equipment is equal to the overall price level. Both price levels are expected to grow at the rate equal to n=0,01. The production function is given by Y = (AKL)0.76 , where A is technology, L is labor and K is capital stock. The level of output is equal to 1600. Assume that the capital stock is always at the desired level. (Please fill in numbers; use a comma as a decimal separator: 10,5) 1. The real value of the user cost of capital is equal to 2. If an increase in productivity of capital increases output by 160, the desired capital stock increases by 3. Suppose that Y=1600, i=0,04, d=D0,09, n=0,01 when the government imposed a tax on the profits of corporations at the rate of 0,25. The change in the desired capital stock is

The nominal interest rate is equal to i=0,04, and the rate of depreciation of capital is d=0,09. The price of capital equipment is equal to the overall price level. Both price levels are expected to grow at the rate equal to n=0,01. The production function is given by Y = (AKL)0.76 , where A is technology, L is labor and K is capital stock. The level of output is equal to 1600. Assume that the capital stock is always at the desired level. (Please fill in numbers; use a comma as a decimal separator: 10,5) 1. The real value of the user cost of capital is equal to 2. If an increase in productivity of capital increases output by 160, the desired capital stock increases by 3. Suppose that Y=1600, i=0,04, d=D0,09, n=0,01 when the government imposed a tax on the profits of corporations at the rate of 0,25. The change in the desired capital stock is

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter7: Production Economics

Section: Chapter Questions

Problem 7E

See similar textbooks

Similar questions

Consider a Cobb-Douglas production function, Y=zKα(Nd)1−α, with 0< α <1. (a) Show that this production function exhibits constant returns to scale. (That is, show that when K becomes xK and Nd becomes xNd, Y becomes xY for x > 0. (b) What is MPN? Is it increasing or decreasing in Nd?
Suppose that the production function is given by y=x10.5X20.3 a) Derive a ridgeline equation for x1 assuming the RTS=1 [
Consider the following variation of the aggregate production function. Now firms must use oil M to produce output (in addition to labor and capital). The price of a unit of oil is p П max II = AK°L³M – wL-rK – pM (a) Find a first-order condition for the firm's demand for oil. (b) What must be true about the parameters a, B, and y if this production function exhibits constant returns to scale? (c) If the price of oil p rises, what would you expect to happen to carbon intensity (the ratio of oil per unit output: M/Y) in this economy? What happens to the revenue share of oil (the ratio of total oil payments to output: pM/Y)?
Davy Metal Company produces brass fittings. Davy's engineers estimate the production function represented below as relevant for their long-run capital‑labor decisions. Q = 500L0.6K0.8, where Q = annual output measured in pounds, L = labor measured in person hours, K = capital measured in machine hours. The marginal products of labor and capital are: MPL = 300L-0.4K0.8 ; MPK = 400L0.6K-0.2 Davy's employees are relatively highly skilled and earn $15 per hour. The firm estimates a rental charge of $50 per hour on capital. Davy forecasts annual costs of $500,000 per year, measured in real dollars. Determine the firm's optimal capital‑labor ratio, given the information above. Show your working. How much capital and labor should the firm employ, given the $500,000 budget? Calculate the firm's output. Davy is currently negotiating with a newly organized union. The firm's personnel manager indicates that the wage…
Consider the following production function:q = (KL)^α, where α > 0.Answer the following questions:(a) Under what conditions (i.e. values of α) will the production function exhibit decreasing returns to scale? Under what conditions will it exhibit constant returns to scale? Under what circumstances will it exhibit increasing returns to scale? (b) Confirm that the marginal physical product of capital is homogenous of degree zero in the case in which the production function exhibits constant returns to scale. (c) Derive an expression for the cost function of a firm using the productionfunction to produce output of a good. (d) Find the first and second partial derivatives of the cost function with respect to q. Interpret the second partial derivative and relate the sign of the derivative to the returns to scale.
Under what conditions do the following production functions exhibit decreasing, constant, or increasing returns to scale. q = L + K q = L + LaKb + K
For each of the following production functions, determine whether it exhibits increasing, constant or decreasing returns to scale: a) Q = 2K + L b) Q = 3L + L/K c) Q = Min(2K,L) d) Q = L*K
The ______ production function is a function that shows the relationship between the quantity of output and the quantity of one variable input given other variable inputs and fixed inputs. Group of answer choices Very short run Short Run Permanent Long Run
A second firm's production function is given by the equation Q = 12L.5K.5. Input prices are $36 per labor unit and $16 per capital unit, and P = $10. a. In the short run, the firm has a fixed amount of capital, K = 9. Create a spreadsheet to model this production setting. Determine the firm's profit - maximizing employment of labor. Use the spreadsheet to probe the solution using your spreadsheet's optimizer.
A bottling company uses two inputs to produce bottles of the soft drink Sludge: bottling machines (K) and workers (L). The isoguants have the usual smooth shape. The machines cost $1,000 per day to run (r), and the workers earn $200 per day (w). At the current level of production, the marginal product of machines (MP) is an additional 123 bottles per day, and the marginal product of labor (MP ) is 69 more bottles per day. Is this firm producing minimum cost? If it is minimizing cost, se explain why. If it is not minimizing cost, explain how the firm should change the ratio of inputs it uses to lower its cost. The bottling company se O A. is not minimizing the cost e production because MP/r> MP, /w and should use less labor and more machines. O B. is not minimizing the cost of production because MPK/MP, = r/w and should use more labor and fewer machines. O C. is not minimizing the cost of production because MPK/r< MP w and should use more labor ad fewer machines. O D. is minimizing the…
Questions 3. For each of the following production functions, determine whether it exhibits increasing, constant or decreasing returns to scale: a) Q = K + L b) Q = L + L/K c) Q = Min(2K,2L) d) Q = (L.5 )(K.5)
I'm curious on how to calculate the SR production function, what I know is q = 20K^.3L^.7 and r = 2 and w = 33 and the K is fixed at 300.