Economics 200
Macroeconomic Theory
Problem Set 1
Due at the beginning of class on September 11, 2007.
1. What type of returns to scale are exhibited by the following production
functions where each of the parameters,
,
and
are positive.
+,
)
1
(a)
;
]œ+O,P
(b)
; and,
] œ
Ö+Oß ,P×
min
(c)
?
] œE +Ð,OÑ Ð"+ÑÒÐ",ÑPÓ
˜™
))
"
)
2. Suppose that the production function
with
describes the
]œEOP
œ
αα
"
"
α
3
technology in an economy.
(a) What is the percentage increase in GDP if the amount of labor input
increases by 2%?
(b) What happens to the real wage and the real rental price of capital if the
amount of labor input increases by 2%?
(c) What happens to output per unit of labor if the amount of labor input
increases by 2%?
3.
Consider the CobbDouglas production function
and recall
"
that
where
.
Suppose that this is the aggregate
QT œÐ" ÑEO P
!
"
P
production function for a competitive economy with competitive firms.
Find the
(conditional) labor demand function
.
Suppose that the labor force is
This is the end of the preview. Sign up
to
access the rest of the document.
This note was uploaded on 04/26/2010 for the course ECON 101 taught by Professor Staff during the Spring '08 term at Vassar.
 Spring '08
 Staff
 Economics, Microeconomics

Click to edit the document details