Book Title
10th Edition
ISBN: 9781337605656
Author: CROSS
Publisher: CENGAGE L
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Chapter 18, Problem 7BCP
Summary Introduction
Case summary: The employee K of the store R&K accessed the photos of person J and disseminated them to the public. The person J filed a suit for mental harassment and illegal use of the information against R&K.
To find: Liability of R&K for the tort committed by its employee K.
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A firm faces the following production function,
Y = AKα L¹-a
(1)
Here Y is output, K is capital, L is fixed labour, and A is a measure of technology.
The firm uses an optimal amount of capital determined by the condition,
MPK = r +8
(2)
Where MPK is the marginal productivity of capital, r is the real interest rate, and ♪ is
the depreciation rate.
(a) Using equations (1) and (2) find an expression for K*, the optimal amount of
capital the firm should use.
[3 marks]
(b) Referring to your result from part (a), comment on what happens to K* when
each of the following variables change (holding other variables constant),
(i)
The measure of technology (A) falls
(ii)
The depreciation rate (8) increases
(iii)
The real interest rate (r) increases
[2 marks]
[2 marks]
[2 marks]
[Hint: For each of parts (i)-(iii) you are being asked to comment on what happens to
K* if just the variable mentioned in the question part changes. Your answer should
state whether K* increases, decreases, or stays the…
question 3
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Strategies to Balance Both customer service levels and controlling costs in sales
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