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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.The price of capital is $5,000,the real interest rate is 10%,and capital depreciates at a 15% rate.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.
Comparative Advantage
A principle that states a country should produce and export goods for which it has a lower opportunity cost compared to other countries.
Allocate Resources
The process of distributing available resources among various projects or business units.
Maximize Output
Involves strategies or actions by a firm to produce as much as possible, often while considering constraints like resources, technology, and market demand.
Comparative Advantage
The capability to produce a particular good or service more efficiently than other producers, allowing for trade benefits.
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