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A firm has current and futuremarginal productivity of capitalgiven byMPK= 10,000 - 2K+N, and marginal productivity of labor given byMPN= 50 - 2N+K. The price
A firm has current and futuremarginal productivity of capitalgiven byMPK= 10,000 - 2K+N, and marginal productivity of labor given byMPN= 50 - 2N+K. The price of capital is 5000, the real interest rate is 10%, and capital depreciates at a 15% rate. The real wage rate is 15. (a)Calculate the user cost of capital. (2 Marks) (b)Find the firm's optimal amount of employmentNand the size of the capital stockK. You must include some key equations to show how you get your final numerical answers. (5 Marks)
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