In an economy the interest rate is 5% and the depreciation rate is 20%. The price of capital is 1. A firm has the following production function Y=AKO.5N0.5 Find the marginal cost of capital Compute the investment desired by the firm, knowing that A=2, K=8, N=1. If the economy is a close economy, what is the amount of national savings? Instead, what if this was an open economy? Explain.
In an economy the interest rate is 5% and the depreciation rate is 20%. The price of capital is 1. A firm has the following production function Y=AKO.5N0.5 Find the marginal cost of capital Compute the investment desired by the firm, knowing that A=2, K=8, N=1. If the economy is a close economy, what is the amount of national savings? Instead, what if this was an open economy? Explain.
Chapter1: Making Economics Decisions
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![In an economy the interest rate is 5% and the depreciation rate is 20%. The price of capital
is 1. A firm has the following production function
Y=AKO.5N0.5
Find the marginal cost of capital
Compute the investment desired by the firm, knowing that A=2, K=8, N=1.
If the economy is a close economy, what is the amount of national savings? Instead,
what if this was an open economy? Explain.
If the governmentimposes a tax on firm revenues of 25%, how does the investment
desired change? Compute it and show what happens in the Investment-Savings
diagram, assuming this is an open economy and the government completely waste
the revenues of this tax.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7b59660e-423c-4787-8fa8-6aaff06e2132%2F0ac8f58d-ef2f-44dc-8a5c-469b22768881%2Fevixiyq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:In an economy the interest rate is 5% and the depreciation rate is 20%. The price of capital
is 1. A firm has the following production function
Y=AKO.5N0.5
Find the marginal cost of capital
Compute the investment desired by the firm, knowing that A=2, K=8, N=1.
If the economy is a close economy, what is the amount of national savings? Instead,
what if this was an open economy? Explain.
If the governmentimposes a tax on firm revenues of 25%, how does the investment
desired change? Compute it and show what happens in the Investment-Savings
diagram, assuming this is an open economy and the government completely waste
the revenues of this tax.
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