Explain what factors determine how much investment is required to maintain a given level of capital per effective worker
What will be an ideal response?
There are three factors that will affect the amount of required investment: depreciation, population growth, and rate of technological progress.
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Suppose that all workers place a value on their leisure of 75 goods per day. The production function relating output per day Y to the number of people working per day N is
Y = 500N - 0.4 N2, and the marginal product of labor is MPN = 500 - 0.8 N. A 25% tax is levied on wages. (a) How much is output per day? (b) In terms of lost output, what is the cost of the distortion introduced by this tax?
Think of the situation of rolling two dice and let M denote the sum of the number of dots on the two dice. (So M is a number between 1 and 12.)
(a) In a table, list all of the possible outcomes for the random variable M together with its probability distribution and cumulative probability distribution. Sketch both distributions. (b) Calculate the expected value and the standard deviation for M. (c) Looking at the sketch of the probability distribution, you notice that it resembles a normal distribution. Should you be able to use the standard normal distribution to calculate probabilities of events? Why or why not? What will be an ideal response?