HW4 11-4-09 - ECO 304K INTRO MICRO Fall 2009 Hickenbottom...

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ECO 304K INTRO MICRO Fall 2009 Hickenbottom HOMEWORK #4 (Due November 4 th at 1pm) 1. a) Draw a picture of a labor market at equilibrium at a wage of $25 per hour where the market is hiring 500,000 hours and 1 firm that is hiring 80 hours of this labor at the market wage. (1 point) b) Explain how an increase in the price of the firm’s output will change the picture for the firm. Explain what determines whether or not the market demand shifts and, if it does shift, in which direction? (1 point) c) Explain how a decrease the supply of labor will affect the market for labor in the short run. In the long run, explain the forces which will determine whether the firm hires more or less capital. (1 point) 2. Consider the following two projects Project A: Costs $10,000 today. Increases profit by $4100 next year and $7,000 the year after that Project B: Costs $6000 today. Increases profit in two years by $7,100 A firm faces a rate to borrow money of 8% and has the option of investing money with almost no risk at 6%. a)
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This note was uploaded on 08/24/2011 for the course ECO 304K taught by Professor Hickenbottom during the Fall '10 term at University of Texas.

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HW4 11-4-09 - ECO 304K INTRO MICRO Fall 2009 Hickenbottom...

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