TAsection05_extension

# TAsection05_extension - < ²< 1 Problem 3 Derive demand...

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TA section 05 April 5, 2009 The representative household maximizes following lifetime utility 1 X t =0 t [log c t + ± log (1 l t )] This household determines how much to consume, own capital and supply labor each period and source of income is the wage according to supply of labor, the rental rate from lending capital to no population growth in this economy. Labor supply is allocated to two sectors, intermediate good sector and research sector. However, household only determines the total level of labor supply since wages from two sectors are same and do not di/er in utility. Problem 1 Formulate the problem of the household. Problem 2 Derive FOCs of the household problem. is given as y t = Z A t 0 x t ( i ) di The &nal good producer±s input is only intermediate good. Assume

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Unformatted text preview: < ² < 1 . Problem 3 Derive demand function of intermediate good from the &nal good producing &rm prob-lem. There are continuum of monopolists in intermediate good sector and each &rm has Cobb-Douglas production technology that use labor and capital as inputs. Let the input price be ³ t and w t for capital and labor respectively. 1 Problem 4 Formulate the intermediate &rm±s problem and solve. (hint : take lagragian multi-plier as industry wide, i.e. not &rm speci&c, so that the solution yields the symmetric equilibrium conditions for all intermediate &rm) Problem 5 What is the intermediate &rm±s pro&t? Problem 6 Write three equilbrium conditions from research sector. Problem 7 Summarize equilibrium conditions including aggregation(Depreciation rate of capital is & ) Problem 8 Solve Social Planner±s problem and compare Euler equation with Competitive Equilib-rium Problem 9 Now suppose ± = 1 what happens to CE and SP? 2...
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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.

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TAsection05_extension - < ²< 1 Problem 3 Derive demand...

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