First screenshot is Question 1. Second and 3rd screenshot is a) and b) done. Last screenshot is what not to do for part c,d and e.
Could you kindly please do parts c, d and e with numeric values? Thank you.
From Book Macroeconomics Eighth Canadian Edition by Andrew Abel (Author), Ben Bernanke (Author), Dean Croushore (Author), Ronald Kneebone (Author)
1. Let K and N denote respectively capital and labour input. Suppose a firm has current and future marginal productivity of capital given by MPK = 10,000 - 2K + N, and marginal productivity of labour given by MPN = 50 - 2N+K. Further suppose the price of capital is $5,000, the real interest rate is 10%, and capital depreciates at a rate of 15%, whereas the real wage is $15. a. Calculate the user cost of capital. b. Find the firm's optimal amount of employment and the size of the capital stock. c. Find the firm's optimal amount of employment and the size of the capital stock if the government introduces a minimum wage law such that the minimum real wage is $12. Explain your numerical findings in terms of the underlying economics. d. Repeat c above except that the minimum real wage is set at $21 instead. Again explain in terms of the underlying economics. e. Now return to the original given situations. Find the impacts on the firm's optimal amount of employment and the size of the capital stock if the central bank changes its monetary policy stance to fight against inflation such that the real interest rate changes by 5% (assuming the central bank is able to do so). Given Marginal productivity of capital (mpk) = 10,000-2k+w tlarginal poodeetrilip of Labour (MPN)=-50-2N+K where kis capital N is labour. price of capital (PK) =$5000. Real interest rate = 10% capital depreciatias (d) = 18% Wage rate (W) = $15 (@ uses cost of capital uc= r Pkt dek (2+ d) Pk 10 + 16) 2000 100 10o = (0.1 +0.18) 5000 UL = $1250 (b The firms dessined capital stock equillibrates UC with expected fulne mpk UC-125 1250 = 10,000 -2ktN 8750 = ak-N N= ak-8750 If firm hines maximum labour at $15 as wage 10- MPN 15-50-2NtK K=QN-35 Place k value in Nequations N= 2(2N-35)-8750 N= uN - 70-8750 Nc4N-8820 3N= 8820 N= 2940 Now Kaa(2940)-35 K k-58 Hence firms optimal amount of employement and size of the capital stocks are N=2940 K=5845 user cost of Capital The and cost for utilizing for one time. a capital asseh calculation consump intermediate tion & other taxes + consumption of fixed capital & Nominal operating supplers- holoding gein. Firms optimal amount olt the size of the respective industry Company giver time. Produce lowest costs per unit molt otton output while max WACC of a market valu. compary maximizing its 1. Let K and N denote respectively capital and labour input. Suppose a firm has current and future marginal productivity of capital given by MPK = 10,000 - 2K + N, and marginal productivity of labour given by MPN = 50 - 2N+K. Further suppose the price of capital is $5,000, the real interest rate is 10%, and capital depreciates at a rate of 15%, whereas the real wage is $15. a. Calculate the user cost of capital. b. Find the firm's optimal amount of employment and the size of the capital stock. c. Find the firm's optimal amount of employment and the size of the capital stock if the government introduces a minimum wage law such that the minimum real wage is $12. Explain your numerical findings in terms of the underlying economics. d. Repeat c above except that the minimum real wage is set at $21 instead. Again explain in terms of the underlying economics. e. Now return to the original given situations. Find the impacts on the firm's optimal amount of employment and the size of the capital stock if the central bank changes its monetary policy stance to fight against inflation such that the real interest rate changes by 5% (assuming the central bank is able to do so). Given Marginal productivity of capital (mpk) = 10,000-2k+w tlarginal poodeetrilip of Labour (MPN)=-50-2N+K where kis capital N is labour. price of capital (PK) =$5000. Real interest rate = 10% capital depreciatias (d) = 18% Wage rate (W) = $15 (@ uses cost of capital uc= r Pkt dek (2+ d) Pk 10 + 16) 2000 100 10o = (0.1 +0.18) 5000 UL = $1250 (b The firms dessined capital stock equillibrates UC with expected fulne mpk UC-125 1250 = 10,000 -2ktN 8750 = ak-N N= ak-8750 If firm hines maximum labour at $15 as wage 10- MPN 15-50-2NtK K=QN-35 Place k value in Nequations N= 2(2N-35)-8750 N= uN - 70-8750 Nc4N-8820 3N= 8820 N= 2940 Now Kaa(2940)-35 K k-58 Hence firms optimal amount of employement and size of the capital stocks are N=2940 K=5845 user cost of Capital The and cost for utilizing for one time. a capital asseh calculation consump intermediate tion & other taxes + consumption of fixed capital & Nominal operating supplers- holoding gein. Firms optimal amount olt the size of the respective industry Company giver time. Produce lowest costs per unit molt otton output while max WACC of a market valu. compary maximizing its
