Consider the following Cobb-Douglas production function: Y AL K¹-0 where 0 = 0.25 Assuming settings of Neo-Classical theory of investment derive the following: a. Function representing the current value of desired stock of capital. b. Current value of desired stock of capital when output is 5 billion $ while rental cost is 0.12. c. Now suppose output is expected to rise to 7 billion $, find corresponding value in desired stock of capital?

Consider the following Cobb-Douglas production function: Y AL K¹-0 where 0 = 0.25 Assuming settings of Neo-Classical theory of investment derive the following: a. Function representing the current value of desired stock of capital. b. Current value of desired stock of capital when output is 5 billion $ while rental cost is 0.12. c. Now suppose output is expected to rise to 7 billion $, find corresponding value in desired stock of capital?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

1. Suppose that output is produced according to the production function Y = K [(1 - u)L], where K is capital, L is the labor force, and u is the natural rate of unemployment. The national savingrate is s, the labor force grows at rate n, and capital depreciates at rate d.a. Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u).b. Write an equation that describes the steady state of this economy. Find the steady state capital per worker and steady state output per worker.c. Does this production function have constant returns to scale? Explain. 2. 2. A small open economy is described by the following equations: C = 60 +.75(Y - T)I = 150 - 20rNX = 150 – 50eM/P = Y - 40r G = 1500M = 2000 P=2R* = 5Assume a balanced budget.a. Derive and graph the IS* and LM* curves.b. Calculate the equilibrium exchange rate, level of income, and net exports.c. Assume a floating exchange rate. Calculate what happens to the exchange rate,…
a. Looking at business fixed investment, explain why investment is negatively related to the interest rates.b. Using the Tobin’s q theory, explain the relationship between investment and capital stock?
Question :The investment function would shift to the left by: a- any event that raisesthe purchase price of capital b- any event that raises the marginal product of capital c- an natural disaster that destroys a major part of capital stock while leaving the labour supply intact d- a technological innovation e- any event that raises the marginal product of labour
Answer the following questions. (a) Can production satisfy both constant returns to scale and diminishing (marginal) returns to capital? (b) Observing a downward trend in the prices of capital goods, some companies decide to decrease or postpone their purchases of such goods. All else equal, will the real interest rate increase or decrease?
Linear
3. Consider the production function Y, = K (AL¿)²-a In 2013, the capital stock Kt increased by 4%, total factor productivity A, increased by 2%, and labor Lt increased by 3%. What is the growth rate of output per worker in 2013? a. (a – 1)% b. (1– a)% c. (5α +2)% d. (2 – a)%
Solve it correctly please. I will rate accordingly.
Answer plzz...
This question requires that you use the law of motion of capital, the production function, and the national income accounts identity. Suppose that a nation's production function is Y= F(Kt,Lt)=K%L}-a You have the following information: The share of income paid to owners of capital The rate of depreciation, 8 =1 The savings rate s=15 The initial capital stock Ko=1 The labor supply, for all t>0 is L=1 What is the long run level of consumption? Please give an exact answer. This question will accept any answer within 0.1 of the correct answer 1/3
Please solve b part.
To the nearest 0.01, what is the present value of each of the following income streams (expressed in unitsof consumption goods), when the real interest rate is r =5%, and when the real interest rate is r =1%?c) m1 =−100, mt =100 for all t =2,...,∞
Calculate the value of consumption of fixed capital from the following:- NNP at FC = 4,000 GDP at MP = 5,000 Net indirect taxes = 300 Net factor income from abroad = 200