University of Minnesota Department of Economics Econ 4331w: Economic Development Homework Assignment 2 - Answer Key Exercise 1 a) (5 points) Describe the …nal goods producing sector in the Romer model. Is there perfect or imperfect competition? Write down the problem of the …rm in this sector and derive the …rst order conditions for optimality. Answer: This sector produces the …nal good using intermediate goods and sells that good to consumers. There RA are a large number of perfectly competitive …rms using the CRS production function Y = L1 xj dj. The Y 0 …rm’ problem is s Z A Z A 1 pj xj , max LY xj dj wLY LY ;xj 0 0 and the …rst order conditions are [LY ] [xj ] : (1 : ) LY L1 Y A xj dj …show more content…
1 X 1+n t 1 1+r = PA = = 1+n (1 + r) t=0 1 + r 1 + r 1 1+r 1+r r n and …nally, we get PA = r n : Exercise 4 There are three approaches to calculation GDP: the expenditure approach, the income approach and the product approach. All three approaches give the same result. In particular, if you add the income of all agents in the economy (the income approach) it should equal the value of the …nal goods produced in the economy (the product approach). This exercise will help you show that this is the case in the Solow model and in the Romer model. a) (2.5 points) Write down the problem of the …rm in the Solow model and obtain the …rst order conditions for optimality. Answer: In the Solow model the problem of the …rm is 1 max K (AL) wL K;L rK, and the …rst order conditions are [K] : K [L] : (1 1 1 (AL) ) K A1 L r = 0, w = 0. b) (5 points) Using the results from part a, obtain the interest rate, r, as a function of Y =K and the wage, w, as a function of Y =L. 1 Answer: This is just simple algebra using the fact that Y = K (AL) : 1 r = w = K (AL) Y )r= . K K 1 K (AL) (1 ) ) w = (1 L 4 ) Y . L c) (2.5 points) Add the capital income, rK, to the labor income, wL, and show that it is equal to the value of the …nal
32. Which of the following amounts must be included in the gross income of the recipient?
4. For the questions 1-3 we found out a couple different cost functions that could be useful for Delta when predicting salaries for 2003 and 2004. The multiple regressions may be most reliable considering it uses multiple variables, but the single R square is better than multiple regressions.
Question 4 Use the following table to answer the questions that follow: According to the table, the labor force participation rate in this economy is equal to:
K2B concludes that the investment must earn at least an 8% return. Compute the net present value of this investment. (Round the net present value to the nearest dollar.)
a. We were already lagging behind the market to begin with. Unless we give an increase in the basic
5. (TCO I) Below is a table showing the income of individuals A and B together with their food and clothing purchases in an untaxed environment (NOTE: K = 1000).
The first breaching experiment I chose was to look up toward the sky or ceiling in a public place. I chose to conduct this experiment during a church service. I am the drummer, so I knew I could attract a lot of attention by looking up. At a break in the service, I looked up, picked one ceiling tile to inspect, pretended to inspect it for about fifteen seconds, and then looked down. The entire congregation was looking up as well with odd looks on their faces. Leading up to the experiment, I assumed that I would be embarrassed to do such a thing, as I am a fairly well-behaved person that does not do anything out of the ordinary. During the experiment, I felt amused and thought it was hilarious to see the reactions
The Solow model indicates that countries with high population growth (with no change in capital) will have lower levels of output per person. In the model therefore, population growth capital per worker and output per worker are constant. Correspondingly, the aim of the Solow Model becomes clear: it is to show that an economy will incline towards a long-run equilibrium K/L (k) ratio at which Y/L (y) is also in equilibrium, so that Y, K and L all grow at the same rate, that is n. Ultimately the model predicts long run equilibrium at the natural
The questions below draw on the material in Chapter 11 and the associated lecture material.
Shade in the box in the appropriate space with a HB pencil on the RESPONSE SHEET.
Even though knowing the production function used in a model provides plenty of useful information about the assumptions made, it does not reveal everything we need to know. In this essay, I will attempt to analyze what information is provided and what is not by the sole knowledge of the production function of the model. I will do that by studying individually each production function we discussed in class. We will make a clear distinction between models with regard to whether exogenous or endogenous technological advancement is assumed. In the first group, Solow (1956), Swan (1956), Cass (1965) and Koopmans (1965) all use the same production function, i.e. the neoclassical production function, while gradually advancing the neoclassical model
X5 = Composite real price of chicken substitutes per lb., which is a weighted average of the real retail prices per lb of pork and
Import payments (M) are a withdrawal from the economy whereas export receipts (X) are an injection back into the economy.
9 2.1.2. Bargaining power of customers............................................................................... 9 2.1.3. Threat of new entrants ........................................................................................... 10 2.1.4. Threat of substitute products ................................................................................. 10 2.1.5. Competitive rivalries within an industry ............................................................... 10 2.2. Generic competitive strategies ..................................................................................... 10 2.2.1. Cost leadership ...................................................................................................... 11 2.2.2. Differentiation ....................................................................................................... 12 2.2.3. Focus ..................................................................................................................... 12 2.2.4. Pursuit of more than one generic strategy ............................................................. 12 3. Methodology ....................................................................................................................... 13 4. Findings ............................................................................................................................... 15 4.1. The introduction of IKEA
Examination Paper Semester I: Managerial Economics IIBM Institute of Business Management Semester-1 Examination Paper Managerial Economics Section A: Objective Type (30 marks) • • • This section consists of multiple choices & Short notes type questions. Answer all the questions. Part one carries 1 mark each & Part two carries 5 marks each. MM.100