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Unformatted text preview: d t = l s t for t = 1 ; 2 and k 2 = a 2 ( we assume k 1 = 0) . The &rm pays rental rate, r , for capital that is &nanced by representative saving asset in period 2 and also w 1 and w 2 for labor wage. The production function of the representative &rm is y = l 1 for period 1 and y 2 = k & 2 l 1 & & 2 with ² < 1 . Problem 1 Formulate the problem of the household. Problem 2 Solve the problem of the household. Problem 3 Formulate and solve the problem of the &rm. Problem 4 Does the &rm have pro&ts in both periods? Proof and explain. Problem 5 Find an equilibrium for this economy: Problem 6 Formulate the social planners problem: Problem 7 Solve the social planners problem: 1...
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This note was uploaded on 05/13/2010 for the course ECON 110D taught by Professor Schmitt-grohe during the Spring '08 term at Duke.
- Spring '08