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6. a) Find the marginal product of inventories (MPH). b) Derive an expression for the desired equilibrium stock of inventories (H) as a function o

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6. a) Find the marginal product of inventories (MPH). b) Derive an expression for the "desired equilibrium stock of inventories" (H) as a function o and output Y by equating the cost of capital to MPH. If r=0.1,b=0.05, and Y=5,000, what the desired stock of inventories? (the stock of inventories does not depreciate, the price of inventories is the same as the price of output, and taxes are ignored, then the real "cost of capital" for inventories is just the interest rate r.) c) If r rose to 0.14, how would the desired stock of inventories change? " (15 ) Assume that the production function is given by Y=AKaHbL1ab, where H is the slock of inventories 6. a) Find the marginal product of inventories (MPH). b) Derive an expression for the "desired equilibrium stock of inventories" (H) as a function o and output Y by equating the cost of capital to MPH. If r=0.1,b=0.05, and Y=5,000, what the desired stock of inventories? (the stock of inventories does not depreciate, the price of inventories is the same as the price of output, and taxes are ignored, then the real "cost of capital" for inventories is just the interest rate r.) c) If r rose to 0.14, how would the desired stock of inventories change? " (15 ) Assume that the production function is given by Y=AKaHbL1ab, where H is the slock of inventories

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