Cornell University
Spring 2011
Economics 3020
Suggested Solutions to Final Exam Practice Problems
April 29, 2011
Professor Karl Shell
1
Production Functions (1)
The elasticity of substitution, =
k/
k/ ,
measures the responsiveness of the capital-labor ra

Cornell University
Spring 2011
Economics 3020
Suggested Solutions to Prelim 1
Question 1:
(a) =PY-WL-RK=PF(K,L)-WL-RK= P25K1/10L9/10-WL-RK.
(b) Taking the first derivative of the production function with respect to L and K and
setting them equal to zero t

Cornell University
Spring 2011
Economics 3020, Apr 6, 2001
Suggested Solutions to Practice Problems for Prelim #2
1. a)
We know that MPL= F (K , L) /L and MPK= F (K , L) /K . Using these
formulas, we have MPL=(35/10)Kt-9/10Nt9/10=(35/10)(Nt/Kt)9/10=(35/10

Cornell University
Spring 2011
Economics 3020
Suggested Solutions to Prelim 2
1
1
Economic Growth (35 minutes):
0
Yt = F (K t , N t ) = 17Kt .3 Nt0.7 ,
Yt = C t + It ,
Kt+1 = F (K t , N t ) C t 0.9Kt ,
Nt+1 = 1.05N t ,
yt = Y t /N t ,
ct = C t /N t ,
it =

Cornell University
Spring 2011
Economics 3020
Problem Set 3
1. Describe the major features of the business cycle. Be sure to discuss what
variables are affected by the cycle, a description of the key features that are
apparent in the data, how variables a

Cornell University
Spring 2011
Economics 3020
Problem Set 4
1. Assume that aggregate labor supply is given by Ls = 1,000(1 + r)(W1/W2),
where r is the real interest rate expressed as a fraction, W1 is the current wage,
and W2 is the future wage.
(a) What

Cornell University
Spring 2011
Economics 3020
Problem Set 5
Due Date: Wed, 27 Apr, 2011
Question 1
Consider the following classical economy:
Desired consumption Cd = 500+0.5Y!200r
Desired investment Id = 300 ! 200r
Government purchases G = 300
Full-employ

Problem Set 2
Question 1:
Suppose a consumer is maximizing utility over two periods, periods 1 and 2.
Question 2:
Refer to the set-up in question #1. Assume P1=P2=1. Let the real interest rate r=0.05
and Y1d = 100, Y2d=0, =1/2.
(a) What does it mean when

Cornell University
Spring 2011
Economics 3020
Suggested Solution to Problem Set 3
1.
The business cycle is dened as a uctuation of aggregate economic activity.
There are recurrent but not periodic movements of aggregate activity, with many
variables movin

Suggested Solution to Problem Set 4
(1) Assume that aggregate labor supply is given by Ls = 1,000(1 + r)(W1/W2),
where r is the real interest rate expressed as a fraction, W1 is the current wage,
and W2 is the future wage.
(a) What is Ls if r is 0.03, W1

ECON 302 Suggested Solutions to Pset 5
Question 1
(a)
IS curve: Y=2200-800r
LM curve: Y= 2000 800 + 400r
P
AD curve: Y=200+ 4000
3P
Y = 1000
P = 5/3
r = 3/2
(b)
Y = 1000
= 800
N X = 400
(c)
NX = 0
G = 100
Question 2
(a) f (k ) = k 0.5
(b) s = 0.3
(c) k =

Cornell University
Spring 2011
Economics 3020
Suggested solutions to practice problems for prelim #1
1. (a) We know that profit is given by PY-WL-RK=PF(K,L)-WL-RK= PAK1/3L2/3-WLRK. Taking the first derivative with respect to L and K and setting them equal

Suggested Solution to Math Digressions Homework
1. (a) Consider scaling up K and L by some proportion , where >0. Then we have
25( K)0.5( L)0.5=25 0.5+0.5K0.5L0.5= 25K0.5L0.5= Y. Hence, output Y is also scaled up
by , and we have constant returns to scale

Solution: Problem Set 2
Question 1:
Question 2:
(a) Since P1=P2, this implies that the inflation rate is zero. This further implies that i=r
(since i=r+ , and =0)
(b) The consumer does not starve in period 2, because he can finance consumption in
period 2

Cornell University
Spring 2011
Economics 3020
Practice Problems for Prelim #1
1. Y=AK1/3L2/3, general price level is P, nominal wage rate is W, nominal capital cost is
R. Markets are competitive. Firms are maximizing profits. y=Y/L, k=K/L, =W/R.
a) What a

Cornell University, Spring 2011
Economics 3020: Macroeconomics
TEACHING TEAM:
Karl Shell
Thorne Professor of Economics
402 Uris Hall (Rusty)
Proposed office hours:
F 3:00p to 5:00p
Lei Sandy Ye
Teaching Assistant
467 Uris Hall (same Rusty)
Tentative offic

AEM 3020, FARM BUSINESS MANAGEMENT
FALL 2011
Name _
(1) List the most important goal you want to accomplish this semester.
(2) What will you need to do to accomplish your most important goal this semester?
(3) List the most important goal you wish to acco

AEM 3020 Farm Business Management
FarmNet Case Study #1
Description of Farm:
Kathy and Mike Eversore operate a 250 cow dairy in Leesburg, NY. The farm was purchased
from Mikes father in 1990. The farm has a small, (double 10) slightly dated, herringbone p

Problem Set #6
Name: _
Lab:_
AEM 302: Farm Business Management
Economic Decision Making
Due: 10/13/2011
Both labs-noon
Farmer Payton owns a herd of commercial beef cattle. She is looking over her
business financial situation and wants your help. She is co

Problem Set #6
Name: _
Lab:_
AEM 302: Farm Business Management
Economic Decision Making
Due: 10/13/2011
Both labs-noon
Farmer Payton owns a herd of commercial beef cattle. She is looking over her
business financial situation and wants your help. She is co

Problem Set #6
Name: _
Lab:_
AEM 302: Farm Business Management
Economic Decision Making
Due: 10/13/2011
Both labs-noon
Farmer Payton owns a herd of commercial beef cattle. She is looking over her
business financial situation and wants your help. She is co

AEM 3020 Farm Business Management
Enterprise Budgets
Name_ Lab_
Problem Set #8
Wednesday Lab Due Monday October 24th, 2011, 12pm
Thursday Lab Due Monday October 24th, 2011, 5pm
Directions: Go onto the web and perform a search for a current agricultural en

AEM 3020 Farm Business Management
Enterprise Budgets
Name_ Lab_
Problem Set #8
Wednesday Lab Due Monday October 24th, 2011, 12pm
Thursday Lab Due Monday October 24th, 2011, 5pm
Directions: Go onto the web and perform a search for a current agricultural en

Problem Set 1, Fall 2011
Name:_ Lab: Weds or Thurs (Circle One)
Agricultural Economics 3020: Farm Business Management
Total Points: 50
Due: September 6th, 2011
12:00 PM for Wed Lab &
Thurs Lab in 216 Warren Hall
Part A: 20 Points
Instructions:
Use the fol

Eversore Operation
INCOME
QUANTITY
2010 Financial Statement
3% growth in milk production and expenses each year
# milk /day
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
/cow days in milk
CWT PriceProjected Gross Income
250 cows
65
305
17
842563
867839
893116

Problem Set #5 2010
Lab _
Name
AEM 3020: Farm Business Management
Economic Principles Problem Set
Due: Noon wed, 5pm thur October 3
Total Points: 50
Formulas of Value in Answering Questions
Future Value Calculations
FV = Future Value
P = Present Amount
i

Problem Set #5 2010
Lab _
Name
AEM 3020: Farm Business Management
Economic Principles Problem Set
Due: Noon wed, 5pm thur October 3
Total Points: 50
Formulas of Value in Answering Questions
Future Value Calculations
FV = Future Value
P = Present Amount
i