{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

150A HW 2 sol

# 150A HW 2 sol - Economics 150A Labor Economics Assignment 2...

This preview shows pages 1–2. Sign up to view the full content.

Economics 150A Labor Economics Assignment 2 Spring 2011 Due date: Wed, June 1 at the beginning of class. Follow the homework guidelines as posted on the webpage (see http://econ.ucsb.edu/~benelli/homework_guidelines.htm). 1. Graphically show the long-run demand for labor if the price of capital increases. 2. A firm uses 1 capital for every 8 workers to produce 1 output. The price of output is \$75, the wage rate is \$6, and the rental rate for capital is \$2 per unit. Assume capital is not a fixed cost. a. What is the profit maximizing level of labor demand if K=5? b. What is the short-run quantity produced? c. What is the profit maximizing level of labor demand if Q=25? d. (hard) What is the long-run quantity produced? Don’t assume Q=25. 3. A new shop has opened and has the following production function: Q=2E 1/3 K 1/3 The price of output is \$5, the wage rate is \$6, and the rental rate for capital is \$2 per unit. a. Find the short-run profit maximizing level of labor demand if capital is fixed at 3 units. b. Find the short-run the elasticity (show your math). c. Find the long-run profit maximizing level of labor demand and capital demand. d. Find the long-run the elasticity (show your math). e. If wages change to \$10, which effect is stronger for capital, substitution or scale? 4. A new shop has opened and has the following production function: Q=2E 2/3 K 3/4 The price of output is \$5, the wage rate is \$6, and the rental rate for capital is \$2 per unit.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 4

150A HW 2 sol - Economics 150A Labor Economics Assignment 2...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online