Unformatted text preview: K , L 2,2 maximize the firm’s profit? (Hint: (i) Compute r and w under given K ∗ , L ∗ , A and . (ii) Then compute the profit for each K , L .) 4. [page 12, 3] NQ 1 (a, b, c). 5. The individual maximizes U c , c 1 3 c 2 c 1 subject to c c 1 1. What is the optimal c , c 1 ? (Hint: (i) If the consumption at t 0 is c then the consumption at t 1 is c 1 1 − c . (ii) Consuming c at t 0 and c 1 1 − c at t 1 gives utility in the amount of 3 c 2 1 − c . (iii) The choice of c is between 0 and 1.)...
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 Fall '07
 MBIEKOP
 Macroeconomics, Englishlanguage films, American films, The Return

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