Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971493
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 18.4, Problem 4QQ
To determine
Thedeterminants of income of owner of land and capital.
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16 - What is the amount of capital that is not needed to realize the current level of production called?A) full capacityB) Missing CapacityC) Idle CapitalD) Idle LaborE) Excess capital
1. If the MRPK is less than the cost of capital, a firm should
increase its investment in physical capital.
decrease its investment in physical capital.
exit the industry.
keep its investment in physical capital the same.
Hula hoop fabricators cost 100 $ each. The Hi-Ho Hula HOOP Company (HHHHC) is trying to decide how many of these machines to buy. HHHHC expects to produce the following number of hoops each year for each level of capital stock shown.
Number of Fabricators
Number of hoops produced per year
0
0
1
100
2
150
3
180
4
195
5
205
6
210
Hula hoops have a real value of 1 $ each. HHHHC has no other costs of Fabricators.
Find the expected future marginal product of capital (MPKf) in terms of Dollars for each level of capital.
If the real interest rate is 12 % per year and the depreciation rate of capital is 20 % per year, find the user cost of capital. How many fabricators should HHHHC buy?
Repeat part (b) for real interest rate of 8 % per year.
Repeat part (b) for a 40 % tax on HHHHC sales revenue.
A technical innovation doubles the number of hoops a fabricator can produce. How many fabricators should HHHHC buy when the real interest…
Chapter 18 Solutions
Principles of Microeconomics (MindTap Course List)
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- 4. Assume the real interest rate is still 10%. If the firm from the previous question (question 3) can buy that piece of machinery that will generate the given profit stream for the next 5 years for $8,000 today, should the firm invest in the machinery? A. Do not invest in the machinery. B. Invest in the machinery.arrow_forwardWhat is an aggregate production function?arrow_forwardAssume there are only two producing sector Y & Z in an economy. Calculatea) Gross value added at market price by each sector b) National income from the followings:Items Amount in CroresNet factor income from abroad- 20Sales by Y= 1000Sales by Z= 2000Change in stock of Z= -200C Closingstock of Y= 50 Opening stock of Y= 100Consumption of fixed capital by Y & Z= 180Indirect taxes paid by Y & Z= 120Purchase of raw material by Y= 500Purchase of raw material by Z= 600Exports by Z= 70arrow_forward
- (7)Which one of these is false when compared to the relationship between marginal and average product? (a) When average product is increasing in labor, marginal product is greater than average product. That is, if APL increases in L, then MPL > APL. (b) When average product is decreasing in labor, marginal product is less than average product. That is, if APL decreases in L, then MPL < APL. (c) The relationship between MPL and APL is not the same as the relationship between the marginal of anything and the average of anything. (d) When average product neither increases nor decreases in labor because we are at a point at which APL is at a maximum, then marginal product is equal to average product.arrow_forward(7)Which one of these is false when compared to the relationship between marginal and average product? (a) When average product is increasing in labor, marginal product is greater than average product. That is, if APL increases in L, then MPL > APL. (b) When average product is decreasing in labor, marginal product is less than average product. That is, if APL decreases in L, then MPL < APL. (c) The relationship between MPL and APL is not the same as the relationship between the marginal of anything and the average of anything.arrow_forwardAssume an economy where there are two producers: a wheat producer and a bread producer. In agiven year, the wheat producer grows 3 million tonnes of wheat, of which 2.5 million tonnes aresold to the bread producer at $30 per bushel, and 0.5 million tonnes are stored by the wheatproducer to use as seed for next years crop. The bread producer produces and sells 100 millionloaves of bread to consumers for $3.50 per loaf. Determine GDP in this economy during this yearusing the product and expenditure approaches.arrow_forward
- Assume a market basket includes three avocados, two loaves of bread, two dozen eggs, and a seasoning packet. Item Price base year ($) Price current year ($) Avocado (per each) 1.25 1.50 Bread (per loaf) 2.99 3.19 Eggs (per dozen) 4.00 4.50 Seasoning (per packet) 1.50 1.25 According to the table shown, what is the change in the price level between the base year and the current year? Please type out the correct answer ASAP with proper explanation thank youarrow_forwardMr. Scoobertini owns a store specializing in soccer jerseys. In 2008, he purchased $150,000 worth of jerseys from manufacturers, employed one worker for $40,000, purchased $20,000 worth of supplies from an office supply store, and sold jerseys for $280,000. Based on this information, what was the value added at Alejandro's store in 2008?A) $70,000B) $110,000C)$280,000D) $490,000arrow_forward7 Aggregate labour hours, L, are given by L = 51*(1-t), where 't' is the rate of income tax. The real wage rate is fixed and equal to 1. At what tax rate is tax revenue maximised? State your answer to 2 decimal places.arrow_forward
- How to economists conceptualise Human Capital? Why are these differences important both empirically and theoretically? (500w)arrow_forward7) Assume that a tire company sells 4 tires to an automobile company for $400, anothercompany sells a compact disc player for $500, and the automobile company puts all of theseitems in or on a car that it sells for $20,000. In this case, how much GDP has been generated?a. $20,000.b. $20,000 less the automobile company’s profit on the car.c. $20,900.d. $20,900 less the profits of all three companies on the items that they sold.arrow_forwardY7 Using the following question: "Is the value of the final goods determined by the factors of production OR does the value of the final Goods determine the value of the factors of production?" How were the Marginalists different than previous economists?arrow_forward
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