ECON 200 Problem Set 1 Fall 2007

ECON 200 Problem Set 1 Fall 2007 - Economics 200...

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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 Cobb-Douglas 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
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This note was uploaded on 04/26/2010 for the course ECON 101 taught by Professor Staff during the Spring '08 term at Vassar.

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