Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Hula hoop fabricators cost $200 each. The HiHo Hula Hoop lCompany is trying to decide how many of these machines to buy. HHHHC expects to
Hula hoop fabricators cost $200 each. The HiHo Hula Hoop lCompany is trying to decide how many of these machines to buy. HHHHC expects to produce the following number of hoops each year for each level of capital stock shown. Number of Number of Hoops Kf Fabricators Produced per Year MP 0 0 NA 1 so $D 55 53D 75 5D so $D 100 $D 105 $D Hula hoops have a real value of $6 each. HHHHC has no other costs besides the cost of fabricators. a. In the above table, nd the expected future marginal product of capital (in terms of dollars} for each level of capital. The mono-com MPHf for the third fabricator, for example, is the real value of the extra output obtained when the third fabricator is added. b. lfthe real interest rate is 11% per year and the depreciation rate of capital is 5% per year, nd the user cost of capital (in dollars per fabricator per year}. (It: = $|:| How many fabricators should HHHHC buy? I: machines
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started