ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
Bartleby Related Questions Icon

Related questions

Question
A firm has the following production function:
Y=AK0.5N0.5
a. After explaining what A represents, find the labour demand of this firm if A=2 and K=25.
b. Suppose that the government decides to put a tax on revenues equal 10%. Find the new
labour demand. What will be the effect of this tax on the equilibrium wage, assuming all
firms have this production function? Use a graph to illustrate your answer.
c. Suppose that a new technology allows the firm to use half of the worker and capital to
produce the same quantity (that is A is now 4!). The government is concerned that now
firms will fire a massive amount of their workforce and it decides to ban the new technology.
Was it a correct fear? Show what would have happened.
d. What would have been the impact of the new technology on the capital desired and
investment of the firm? Explain.
expand button
Transcribed Image Text:A firm has the following production function: Y=AK0.5N0.5 a. After explaining what A represents, find the labour demand of this firm if A=2 and K=25. b. Suppose that the government decides to put a tax on revenues equal 10%. Find the new labour demand. What will be the effect of this tax on the equilibrium wage, assuming all firms have this production function? Use a graph to illustrate your answer. c. Suppose that a new technology allows the firm to use half of the worker and capital to produce the same quantity (that is A is now 4!). The government is concerned that now firms will fire a massive amount of their workforce and it decides to ban the new technology. Was it a correct fear? Show what would have happened. d. What would have been the impact of the new technology on the capital desired and investment of the firm? Explain.
Expert Solution
Check Mark
Knowledge Booster
Background pattern image
Economics
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education