Assume that a firm has future marginal productivity of capital given by MPK = A(100-K). The...
Assume that a firm has future marginal productivity of capital given by MPK = A(100-K). The price of capital (machine) is $20,000, the real interest rate is 10%, and capital depreciates at a 10% rate. Assume further that each unit of output sells for $50.
A) Calculate the user cost of the capital (in real term) that the firm faces.
B) Assume A=1, then calculate the desired capital stock. What is the firm’s gross investment if the firm currently has 10 machines? (Assume the machines depreciate at the same rate as the usual rate above.)
C) If the TFP increases to 2, i.e. A=2, then what is the gross investment (still assume the firm currently has 10 machines)?
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Assume that a firm has future marginal productivity of capital
given by MPK = A(100-K). The...
1. Assume that a firm has future marginal productivity of capital given by MPK-A(100-K). The price...
1. Assume that a firm has future marginal productivity of capital given by MPK-A(100-K). The price of capital (machine) is $20,000, the real interest rate is 10%, and capital depreciates at a 10% rate. Assume further that each unit of output sells for $50. A) Calculate the user cost of the capital (in real term) that the firm faces. B) Assume A-1, then calculate the desired capital stock. What is the firm's gross investment if the firm currently has 10...
The equation for the marginal productivity of capital is given by MPK-1,000 10 The price of...
The equation for the marginal productivity of capital is given
by
MPK-1,000 10 The price of a unit of capital is 2,000 The rate of depreciation is: 5% per year. The real interest rates: 9% per year If the existing level of capital Kt is equal to 60 units, what is the level of gross investment? It = units (enter your answer rounded to one decimal place)
1. Marginal productivity of capital in a given economy is described by the following function: MPK...
1. Marginal productivity of capital in a given economy is described by the following function: MPK = 48/J(K), where K stands for aggregate capital and MPK for marginal productivity of capital. (a) Use words to explain what MPK measures. (b) Calculate MPK when K = 16 and when K = 64. How does MPK change as K increases? What property does this MPK function capture? (c) Write down the two assumptions of the classical environment and explain what they imply....
Assume that a firm’s beginning capital stock is $500,000 and capital depreciates at a rate of...
Assume that a firm’s beginning capital stock is $500,000 and capital depreciates at a rate of five percent per annum. Now assume that the firm also spends the following on gross investment (starting from the beginning year): $10,000, $30,000, and $30,000. Then the firm’s capital stock at the beginning of the third year is different from the beginning capital stock by (1) $70,000.00. (2) -$25,000.00. (3) -$3,787.50. (4) $45,000.00
Question 3: Productivity, Output, and Employment (20 marks) Assume that the aggregate production is given by...
Question 3: Productivity, Output, and Employment (20 marks) Assume that the aggregate production is given by the following: Y stands for output, K stands for the capital stock, N stands for the number of the people employed, L stands for the quantity of land used in production, and A stands for a measure of labour efficiency. α and β are parameters whose values are between 0 and 1. a) Derive an analytical expression for the marginal product of capital (MPK),...
Question 3: Productivity, Output, and Employment (20 marks) Assume that the aggregate production is given by...
Question 3: Productivity, Output, and Employment (20 marks) Assume that the aggregate production is given by the following: Y stands for output, K stands for the capital stock, N stands for the number of the people employed, L stands for the quantity of land used in production, and A stands for a measure of labour efficiency. a and B are parameters whose values are between O and I a) Derive an analytical expression for the marginal product of capital (MPK),...
[Part A: Choose the best answer among the choices.) 1) What is the difference between gross...
[Part A: Choose the best answer among the choices.) 1) What is the difference between gross investment and net investment? A) Net investment gross investment minus taxes B) Net investment gross investment minus nct factor payments C) Net investment gross investment minus inventory accumulation D) Net investment gross investment minus depreciation 2) A technological improvement will A) decrease the desired capital stock. B) increase the desired capital stock C) have no effect on the desired capital stock. D) have the...
7) An invention that raises the future marginal product of capital (in a closed economy) would...
7) An invention that raises the future marginal product of capital (in a closed economy) would cause an increase in desired investment, which would cause the investment curve to shift to the and would cause the real interest rate to A) right; increase B) right; decrease C) left; increase D) left; decrease 8) Over the past year, output grew 4 %, capital grew 2 % , and labor grew 1 %. If the elasticities of output with respect to capital...
Suppose a firm has a production function given by Q = L1/2 K1/2. Therefore, MPL = K1/2 / 2L1/2 and MPK = L1/2 / 2K1/2 Th...
Suppose a firm has a production function given by Q = L1/2 K1/2. Therefore, MPL = K1/2 / 2L1/2 and MPK = L1/2 / 2K1/2 The firm can purchase labor, L at a price w = 36, and capital, K at a price of r = 9. a) What is the firm’s Total Cost function, TC(Q)? b) What is the firm’s marginal cost of production?
Suppose the production function for a firm is given by: q=4L^0.75*K^0.25. If the firm currently has...
Suppose the production function for a firm is given by: q=4L^0.75*K^0.25. If the firm currently has 20 units of capital (K) and 10 units of labor (L), then calculate the Marginal Rate of Technical Substitution (MRTSLK).
1. Assume that a firm has future marginal productivity of capital given by MPK-A(100-K). The price of capital (machine) is $20,000, the real interest rate is 10%, and capital depreciates at a 10% rate. Assume further that each unit of output sells for $50. A) Calculate the user cost of the capital (in real term) that the firm faces. B) Assume A-1, then calculate the desired capital stock. What is the firm's gross investment if the firm currently has 10...
The equation for the marginal productivity of capital is given
by
MPK-1,000 10 The price of a unit of capital is 2,000 The rate of depreciation is: 5% per year. The real interest rates: 9% per year If the existing level of capital Kt is equal to 60 units, what is the level of gross investment? It = units (enter your answer rounded to one decimal place)
1. Marginal productivity of capital in a given economy is described by the following function: MPK = 48/J(K), where K stands for aggregate capital and MPK for marginal productivity of capital. (a) Use words to explain what MPK measures. (b) Calculate MPK when K = 16 and when K = 64. How does MPK change as K increases? What property does this MPK function capture? (c) Write down the two assumptions of the classical environment and explain what they imply....
Question 3: Productivity, Output, and Employment (20 marks) Assume that the aggregate production is given by the following: Y stands for output, K stands for the capital stock, N stands for the number of the people employed, L stands for the quantity of land used in production, and A stands for a measure of labour efficiency. α and β are parameters whose values are between 0 and 1. a) Derive an analytical expression for the marginal product of capital (MPK),...
Question 3: Productivity, Output, and Employment (20 marks) Assume that the aggregate production is given by the following: Y stands for output, K stands for the capital stock, N stands for the number of the people employed, L stands for the quantity of land used in production, and A stands for a measure of labour efficiency. a and B are parameters whose values are between O and I a) Derive an analytical expression for the marginal product of capital (MPK),...
[Part A: Choose the best answer among the choices.) 1) What is the difference between gross investment and net investment? A) Net investment gross investment minus taxes B) Net investment gross investment minus nct factor payments C) Net investment gross investment minus inventory accumulation D) Net investment gross investment minus depreciation 2) A technological improvement will A) decrease the desired capital stock. B) increase the desired capital stock C) have no effect on the desired capital stock. D) have the...
7) An invention that raises the future marginal product of capital (in a closed economy) would cause an increase in desired investment, which would cause the investment curve to shift to the and would cause the real interest rate to A) right; increase B) right; decrease C) left; increase D) left; decrease 8) Over the past year, output grew 4 %, capital grew 2 % , and labor grew 1 %. If the elasticities of output with respect to capital...
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