Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 3, Problem 3RQ
To determine
The concept of the marginal product of capital is to be determined along with its graphical presentation.
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Suppose that capital's and labor's share of income are 0.3 and 0.7, respectively. What would be the effect on output given that there is an increase in the capital stock by 10%?
Find the marginal products of capital and labour (MPK and MPL).
Give typing answer with explanation and conclusion
Production function Y=8*K^.33*L^.66 Now what if there is skill biased technological change that makes capital more productive relative to labor such that alpha or the exponent on K rises to .5 and the exponent on L falls to .5 By what % does real wage change? By what % does R/P change?
Chapter 3 Solutions
Macroeconomics
Ch. 3 - Prob. 1RQCh. 3 - Prob. 2RQCh. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Prob. 8RQCh. 3 - Prob. 9RQCh. 3 - Prob. 10RQ
Ch. 3 - Prob. 11RQCh. 3 - Prob. 12RQCh. 3 - Prob. 13RQCh. 3 - Prob. 14RQCh. 3 - Prob. 15RQCh. 3 - Prob. 1NPCh. 3 - Prob. 2NPCh. 3 - Prob. 3NPCh. 3 - Prob. 4NPCh. 3 - Prob. 5NPCh. 3 - Prob. 6NPCh. 3 - Prob. 7NPCh. 3 - Prob. 8NPCh. 3 - Prob. 9NPCh. 3 - Prob. 10NPCh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Prob. 4APCh. 3 - Prob. 5APCh. 3 - Prob. 6APCh. 3 - Prob. 7AP
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- Explain the rule that proft-maximizing frms follow when they decide howmuch capital and labor to hire.arrow_forwardDescribe Locke's labor theory of property. (What is his fundamental hypothesis? How much of value does labor contribute? What are the original limits to accumulation?)arrow_forwardwhat happens in the work-leisure model, when the wage rate is decreasing and income effect is stronger than substitution effect?arrow_forward
- Which type of income is composed of both the labour income and capital income of those person who provide both labour and capital services One wordarrow_forwardUnder what assumptions is the aggregate labour demand function to be represented as a downward-sloping curve so that the real wage equals the marginal product of labour?arrow_forwardd. Calculate the marginal product of capital MPK. e. Calculate the marginal product of labor (MPL).arrow_forward
- Conceptually, what does it mean for the shadow price of capital to be equal to 1.3? (what does this particular number mean)?arrow_forwardThe __________ is the belief that work is an obligation and that capital should be reinvested for further profits ratherthan used for immediate enjoyment.arrow_forwardIdentify the following variables as procyclical, countercyclical, or acyclical: (1) consumption, (2) real wage, (3) employment, and (4) total factor productivity.arrow_forward
- What is the difference between the rental price and the purchase price of capital?arrow_forwardF (L, K) = L0.2K0.7, The wage rate (price per unit of labour) is w = 2 and the capital rental rate (price per unit of capital) is r = 7. Derive the equation of the isoquant for y = 2 (with K in the vertical axis and L in the horizontal axis). Use the first and second derivative to show that this curve is decreasing and convex. Provide a graphical representation of the isoquant indicating at least one combination of labour and capital in this curve.arrow_forwardcompute the marginal product of capital (MPK) and the marginal product of capital (MPL) of a. Q=3 K0.4+4 L0.3arrow_forward
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