Suppose a country has a production function Y=2K0.5L0.5, where K is the amount of capital and L is the amount of labor. The economy begins with 400 units of capital and 625 units of labor. Find numerical answers to the following. Be sure to show your work. What is the real wage and the real rental price of capital? (Hint: Assume the firms are maximizing profit.) Suppose there is a natural disaster and half of the capital is destroyed. What is the new level of output? What is the new real wage and real rental price of capital? How much output does the economy produce? Please answer all part I will rate
Suppose a country has a production function Y=2K0.5L0.5, where K is the amount of capital and L is the amount of labor. The economy begins with 400 units of capital and 625 units of labor. Find numerical answers to the following. Be sure to show your work. What is the real wage and the real rental price of capital? (Hint: Assume the firms are maximizing profit.) Suppose there is a natural disaster and half of the capital is destroyed. What is the new level of output? What is the new real wage and real rental price of capital? How much output does the economy produce? Please answer all part I will rate
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- Suppose a country has a production function Y=2K0.5L0.5, where K is the amount of capital and L is the amount of labor. The economy begins with 400 units of capital and 625 units of labor. Find numerical answers to the following. Be sure to show your work.
- What is the real wage and the real rental price of capital? (Hint: Assume the firms are maximizing profit.)
- Suppose there is a natural disaster and half of the capital is destroyed. What is the new level of output?
- What is the new real wage and real rental price of capital?
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