. Explain the following questions correctly.

Question 1: Simple Solow Growth Models Consider the following story of Robinson Crusoe. There is a single good that can be combined with labour to produce itself. Think of Robinson using coconuts and his own labour to grow more coconuts. In each period Robinson has some amount of coconuts that he uses to produce more. Call this amount K. When combined with his labour input, L, the result will be a net increase of coconuts equal to Y. The net production function is given by; Yt = F(Kt, Lt) = At(Kt) ? (Lt) 1-? (1) where A measures total factor productivity, K is the number of coconuts used as capital goods, L is the labour input, and ? is in the (0,1) interval. That this is a net production function simply means that Y is the amount of additional coconuts that RC gets through the production process; he also has the initial coconuts that he used as inputs, after ? percent of them depreciate through use. The total labour-force of Crusoes (all identical) increases as follows: Lt = (1+n)Lt-1 (2) Finally, all members of the Crusoe Family save a constant fraction, s, of their net production. This is basically the Solow growth model. a) Derive the equation that shows the evolution of the capital per worker (k = K/L). Show the condition which must be satisfied in the steady state where k is constant. Explain, intuitively, why this condition makes sense. b) If savings rate is 15%, Labor growth rate is 2%, the depreciation rate is 10%, At = 10 and ? = 0.30, calculate the value of the steady-state per capita stock of coconuts, (k*), steady-state per capita output (y*) and steady-state per capita consumption (c*). Show in a diagram the unique non-zero steady-state value of k*. What is the growth rate of K/L, Y/L, and C/L. c) If the economy is initially in a steady state and At increases to 12, describe the growth path of K/L and Y/L as we move to another steady state. Show the process in a diagram. d) Given that now At = 12, calculate the new values of the steady-state per capita stock of coconuts, (k*), steady-state per capita output (y*) and steady-state per capita consumption (c*). Show in a diagram the unique non-zero steady-state value of k*. Suppose now that the Crusoes decided that they would no longer arbitrarily choose to save the fraction s of their net production. Instead, their goal is to maximize the value of per capita consumption in steady state. Though the Crusoes do not know it, they are now attempting to find what is called the "golden rule" level of k and c. Noting that nothing else in the economy has changed, except that At = 12, it should be clear that the evolution of the per capita stock of coconuts is now given by dk/dt = f(kt) - ct - (? + n)kt (3) e) Show what condition must be satisfied at the "golden rule" level of k and c. Using the production function given, calculate the value of steady-state k, y, and c in this new economy and compare them to the steady-state values in the original economy with At = 12. Why are the two equilibriums not the same? What will they do to get to the "golden rule" values? f) Now if the per capita output (Y/L) = AK/L, Plot the output, required investment, and actual savings functions on a graph (for a case where savings is greater than required investment right from the start). Is there a unique steady state? h) What is the steady state growth for Y, K, (Y/L) and (K/L)

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Exercise 1 (Solow growth model, 20 points). Suppose that the production function is Y = zKIN and that 8% of capital wears out every year. Assume that the rate of growth of the population is 2% and the saving rate is 20%. I (a) If z = 2, what is the steady-state capital per worker, k.., the steady-state output per worker, yes, the steady-state consumption per worker, c.s, and the steady-state investment per worker, (b) What is the steady-state growth rate of the capital per worker, k.s, and the steady-state growth rate of the output per worker, y.,? And what is the steady-state growth rate of the capital stock, Ass, and the steady-state growth rate of the aggregate output, Y,,? Show your work. (c) What is the golden rule level of capital, k*, and the savings rate associated with the golden rule level of capital, s*? Can the country increase the consumption per-capita by changing the saving rate? (d) Now assume that there is no population growth, i.e. n =0, and that the saving rate is given by some other value called s'. Suppose that this economy is in a steady state where the marginal product of capital is less than the depreciation rate. By changing the saving rate is it possible to increase the steady state consumption per-capita? Explain how would you change the saving rate.1. Competition among businesses has never been greater. Identify and describe several ways that businesses can become more competitive. 2. When describing the state of the U.S. economy, reporters often refer to the nation's GDP. its unemployment rate and the CPI. Explain what each of these terms means and why each measure is significant. Identify and describe the 4 basic rights that form the foundation of capitalism. Explain the significance of "price" in a free market economic system. Describe and provide examples of 3 different strategies for reaching global markets. Explain and provide examples of the difference between comparative and absolute advantage in global markets. 7. Identify the 3 questions that an ethics-based manager should ask when facing a potentially unethical action and provide an example where you would use these 3 questions to evaluate a decision. 8. Although most new firms start out as sole proprietorships, few large firms are organized this way. Why is the sole proprietorship such a popular form of ownership for a new firm? What features of the sole proprietorship make it unattractive to growing firms? 9. List and discuss at least 3 causes of small business failure. 10. Identify and describe at least 3 attributes of a successful entrepreneur 11. Describe the 3 basic styles of management skills and relate these skills to the tasks performed at different levels of management. 12. What is empowerment? How has this movement changed the role management? 13. Explain the difference between a firm's formal organization and its informal organization. Why are both types important to management? 14. What is a matrix organization? What advantages and disadvantages are associated with this type of organization? 15. How has the role of quality control changed in recent years? Describe some of the modes