Question
An economy is characterized by a marginal product of labor given by the equation MP N = 2KN^(1/2) , where K is the fixed capital
An economy is characterized by a marginal product of labor given by the equation MP N = 2KN^(1/2) , where K is the fixed capital stock.
(a) Using integration, derive the aggregate production function for this economy. Use the initial condition that output F(K, N) = F(4, 0) = 0.
(b) Find the aggregate labor demand function. Let w be the real wage.
(c) Suppose the aggregate labor supply function is N^s = w^2 . Find the equilibrium real wage, equilibrium level of employment and equilibrium level of output for this economy.
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Intermediate Microeconomics and Its Application
Authors: Walter Nicholson, Christopher M. Snyder
12th edition
978-1133189022, 1133189024, 1133189032, 978-1305176386, 1305176383, 978-0357687000, 978-1133189039
