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WeekofApr06 - y = 100& 3 p(rather than y x = 100& 3 p...

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W3211 Spring 2009 Professor Vogel Recitation Week of 04/06/09 The rental rate of capital is v > 0 and the wage rate for labor is w > 0 . 1. The demand facing Edgar°s ±rm, Edgaria, is given by q = 100 ° 3 p . Suppose Edgaria°s production function is f ( k; l ) = k ° l 1 ° ° , where ° 2 (0 ; 1) . How much capital and labor should Edgar hire? 2. The demand facing Edgar°s ±rm, Edgaria, is given by q = 100 ° 3 p . Suppose that if Edgar decides to produce any output, he has to ±rst give the government x ± 0 units of his output. That is, if Edgar sells y > 0 units in the market, he actually has to produce y + x units of output with x going to the government. The amount of output Edgar gives the government has no e/ect on demand. That is, we have
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Unformatted text preview: y = 100 & 3 p (rather than y + x = 100 & 3 p ) . Edgaria&s production function is f ( k; l ) = k & l 1 & & , where & 2 (0 ; 1) . If Edgar chooses to produce, how much capital and labor should Edgar hire? What is the weakest condition under which Edgar will produce anything? 3. The demand facing Edgar&s ±rm, Edgaria, is given by q = ap e , where a > and e > . Suppose Edgaria&s production function is f ( k; l ) = ( k & l 1 & & ) ± , where & 2 (0 ; 1) and ± 2 (0 ; 1) . How much capital and labor should Edgar hire?...
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