Econ HW #2

# Econ HW #2 - Kelly O'Boyle Economics 302 Section 302 1 a...

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Kelly O’Boyle Economics 302 Section 302 1) a. The firm’s profit function is Profit=Pf(K,L)–wL–RK P is held constant, w is held constant, and R is held constant. This is so that profit is a function of the price of output, factor prices, and factor quantities which depend on technology. b. If the labor income share in production is equal to 0.75, which equals 1- α , then α equals 0.25 c. (10*5)/2= 25 d. Based on the information and answers I have found above, and if the level of technology is 1, I find that the level of labor it zero, because in part c, I did not factor in any labor because I did not know how to factor it in if I was not already given either w or L. e. In a profit maximizing firm, P*MPL is equal to W, so in this example, that holds true. 2) a. Y=AK 0.4 L 0.6 C=250+0.7(Y-T) K=100 A=45 I=1650-16000r L=100 T=500 S G =-100 S P =Y-C-T Y=45(100) 0.4 (100) 0.6 Y=4,500 C=250+0.7(4500-500) C-3,050 S P =4500-3050-500 S P =950 S=950-100 S=\$850 b. 850=1650-16000r r=5% I=1650-16000(0.05) I=\$850 c. Y=same=\$4500 C=same=\$3050 S=same=\$850 850=2050-20000r r=6% I=2050-20000(0.06) I=\$850 d. Technological changes do affect the level of output in the economy.

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• Spring '08
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• Economics, Harshad number, percentage change, Canada Mexico U.S. Japan Korea Czech Republic Denmark Hungary Iceland Norway Poland Slovak Republic Sweden Switzerland Turkey U.K. Brazil India Indonesia Russian Federation South Africa, South Africa CPI, Kelly O'Boyle Economics

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