2. Suppose that computers use 2 units of capital for each worker, so that Kc = 2. Lc, whereas shoes use 0.5 unit of capital for each worker, so that Ks = 0.5 Ls. There are 100 workers and 100 units of capital in the economy. b) a) Solve for the amount of labor and capital in each industry and graph them in a box diagram. Suppose that the number of workers increases to 125 due to immigration, keeping total capital fixed at 100. Again, solve for the amount of labor and capital used in each industry and show in your previous graph. c) Suppose instead that the amount of capital increases to 125 due to FDI, keeping the total number of workers fixed at 100. Again, solve for the amount of labor and capital used in each industry. Graph in a new box diagram

2. Suppose that computers use 2 units of capital for each worker, so that Kc = 2. Lc, whereas shoes use 0.5 unit of capital for each worker, so that Ks = 0.5 Ls. There are 100 workers and 100 units of capital in the economy. b) a) Solve for the amount of labor and capital in each industry and graph them in a box diagram. Suppose that the number of workers increases to 125 due to immigration, keeping total capital fixed at 100. Again, solve for the amount of labor and capital used in each industry and show in your previous graph. c) Suppose instead that the amount of capital increases to 125 due to FDI, keeping the total number of workers fixed at 100. Again, solve for the amount of labor and capital used in each industry. Graph in a new box diagram

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.2P

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Suppose that production function of certain devices is determined by: q = k * L - 0.8 k2 - 0.2 L2 Where q represents annual quantity of devices produced, k represents annual quantity of capital factor, and L represents annual quantity of labor factor. (a) Suppose k = 10; draw a graph with average and total labor productivity. What is level of labor (L) factor at which average productivity reaches a maximum? How many devices are produced at that point? (b) Assuming again that k = 10, plot Marginal Product (MP) curve. At what level do we have that labor (L) factor is MP = 0? (c) Suppose capital (k) factor were to increase to k = 20. How would your previous answers change?
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ASAP
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