Econ 102 Roger E A Farmer Fall 2008 Assignment for Week Eight 1.Consider an economy in which there are two technologies. The production function takes labor X to produce output Y: 3YX=The search technology takes Hunits of searching unemployed workers and Vunits of searching recruiters to produce Ljobs: 1/2LHV=There is a representative household that has 1 unit of time. The household gets utility from consumption and has no utility of leisure. A.Write down the social planning problem and solve it for the optimal values of L, V, X, Yand C. B.Write down the problem of the firm in a competitive search economy. What does the firm take as given? (You may assume that the firm owns its own capital and that the household owns the firm). C.If the real wage is equal to 3/4 will there be too much unemployment or too little unemployment? Explain your answer. D.What will be the value of the firm? Explain your answer. 2.Consider an economy in which there are two technologies. The production function
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