Consider the production function: Y = A. K0.8 N0.2 with A = 5, K = 400, N = 3000 (a) What is the level of output produced in this economy? (b) What is the Marginal Product of Labour? (c) What is the Marginal Product of Capital? (d) A unit of output sells for $100? The nominal interest rate is 5%, the expected inflation rate is 3%, the depreciation rate is 13%, and the population growth rate is 2%. If a unit of capital costs $5,000, is the capital market in equilibrium. If not, is there too much or too little capital?
Consider the production function: Y = A. K0.8 N0.2 with A = 5, K = 400, N = 3000 (a) What is the level of output produced in this economy? (b) What is the Marginal Product of Labour? (c) What is the Marginal Product of Capital? (d) A unit of output sells for $100? The nominal interest rate is 5%, the expected inflation rate is 3%, the depreciation rate is 13%, and the population growth rate is 2%. If a unit of capital costs $5,000, is the capital market in equilibrium. If not, is there too much or too little capital?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter7: Production Economics
Section: Chapter Questions
Problem 1.5CE
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Transcribed Image Text:Consider the production function: Y = A. K0.8 N0.2 with A = 5, K = 400, N = 3000
(a) What is the level of output produced in this economy?
(b) What is the Marginal Product of Labour?
(c) What is the Marginal Product of Capital?
(d) A unit of output sells for $100? The nominal interest rate is 5%, the expected inflation
rate is 3%, the depreciation rate is 13%, and the population growth rate is 2%. If a
unit of capital costs $5,000, is the capital market in equilibrium. If not, is there too
much or too little capital?
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