A domestic economy can produce wine or bread using labor with the following technology:Yw = 21Y6 = 0.51Preferences in this economy are Cobb-Douglas and given by:u (Cu, Cb) = 0.2 log cu + 0.8 log csTotal labor endowment in this economy is 1 million workers that are perfectly mobile across sectors.A foreign economy is instead characterized with the following technology:Y = 31%3DThe foreign economy has the same preferences as the domestic, but a labor supply of 10million workers.What is the equilibrium competitive wage rate in units of bread for the home economy under free-trade?3/222/31/2

Technology for the domestic country: yw = 2lw yb = 0.5lb Technology for the foreign country: y*w =…

Answered: A domestic economy can produce wine or…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION THREE: PRODUCER THEORY 1. Suppose the production function for automobiles is given by q = kl - 0.8k² - 0.21² where q represents the annual quantity of bicycles produced, k represents annual capital input, and I represents annual labor input. a) Suppose k=10; graph the total and average productivity of labor curves. At what level of labor input does this average productivity reach a maximum? How many cars are produced at that point? b) Again, assuming k=10, graph the MP curve. At what level of labor input does MP₁ = 0 c) Suppose capital inputs were increased to k-20. How would your answer to parts (a) and (b) change? d) Does the production of automobiles exhibit constant, increasing, or decreasing returns to scale? 2. Supposing that the firm in (1) is a competitive firm and its production function is y = 10 + (x - 1,000)¹/3. The price of the input x is w = 1. (a) Show that the firm's total cost curve is C(y) = 1,000 + (-10)³. (b) Show that the minimum of the marginal cost curve…
Consider the Labor Economics Question. This will provide insight into the idea of the optimal number of workers and the value of the marginal product of labor. If wages in the restaurant is $20.00 per hour and the price of a Hamburger is $8.00 and the production function for the workers is: Q = 11L – 0.25L^2 a. How many workers should Your Restaurant employ during the lunch hour to maximize profits? 1 Point (note—the value of the marginal product of labor and the marginal revenue product are the same) We maximize profits which are total revenues less total costs: b. Compute the maximum profit at Your Restaurant. (note—consider that profit involves Total Revenue and Total Costs). 1 Point c. Compute the profit created if You hire an additional worker. Explain why it is or is not profit maximizing to hire an additional worker. The idea of this question is to recognize that we can find the profit maximizing quantity of labor– after that point, profit begins to…
Consider the Labor Economics Question. This will provide insight into the idea of the optimal number of workers and the value of the marginal product of labor. If wages in the restaurant is $16.80 per hour and the price of a Hamburger is $8.30 and the production function for the workers is: Q = 11L – 0.25L2 How many workers should Your Restaurant employ during the lunch hour to maximize profits? 1 Point (note—the value of the marginal product of labor and the marginal revenue product are the same) We maximize profits which are total revenues less total costs:
Consider a price-taking firm whose production function is given by q=3L1/5 K1/9 where L and K denote respectively the amount of labour and capital the firm uses to produce q units of output. Suppose the price of labour is w = 16, the price of capital is 24 and the price of the firm's output is p=225 . Derive the firm's conditional demand for capital. Then enter below the amount of capital the firm would use to produce 100 units of output at minimum cost.

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