week 1 lecture 1

• What are the two factors of production in the long-run model?

  Labour and Capital
• What does the aggregate production function Y = F(N, K) represent?

  Output as a function of Labour and Capital
• What is the condition for the marginal product of labour in the production function?

  $\frac{\partial Y}{\partial N} > 0$
• What does the term $\frac{W}{P}$ represent in the firm's profit maximization problem?


  Real wage
• If a firm's production function is $Y =$$F(N, K)$, what is the firm's profit maximization condition for labour?


  $\frac{\partial F(N, K)}{\partial N} =$$\frac{W}{P}$
• What is the condition for long-run equilibrium in the capital market?

  $I =$$\delta K$
• What does the Cobb-Douglas production function $Y =$$AN^\nu K^{1-\nu}$ imply about returns to scale?


  Constant returns to scale
• If $\nu =$$0.6$ in the Cobb-Douglas production function, what is the marginal product of labour?


  $\frac{\partial Y}{\partial N} =$$\frac{0.6}{N} Y$
• How does an increase in capital (K) affect the marginal product of labour (MPL) in the Cobb-Douglas production function?

  MPL increases

  
• What is the role of the government in the long-run model?

  Demander of goods and services funded by taxes
• What does the term $\frac{R}{P}$ represent in the firm's profit maximization problem?


  Real rental price of capital
• If a firm's production function is $Y =$$F(N, K)$, what is the firm's profit maximization condition for capital?


  $\frac{\partial F(N, K)}{\partial K} =$$\frac{R}{P}$
• What is the condition for long-run equilibrium in the labour market?

  Supply of labour equals demand for labour
• What does the term $\frac{\partial^2 Y}{\partial N^2} < 0$ imply about the production function?


  Diminishing marginal product of labour

  
• If $\nu =$$0.6$ in the Cobb-Douglas production function, what is the marginal product of capital?


  $\frac{\partial Y}{\partial K} =$$\frac{0.4}{K} Y$
• How does an increase in labour (N) affect the marginal product of capital (MPK) in the Cobb-Douglas production function?

  MPK increases
• What is the condition for full employment of factors in the long-run model?

  Supply determines output
• What does the term $\frac{\partial^2 Y}{\partial K^2} < 0$ imply about the production function?


  Diminishing marginal product of capital
• If a firm's production function is $Y =$$AN^\nu K^{1-\nu}$, what is the marginal product of labour?


  $\frac{\partial Y}{\partial N} =$$\frac{\nu}{N} Y$
• How does a decrease in labour (N) affect the marginal product of capital (MPK) in the Cobb-Douglas production function?

  MPK decreases

  
• What is the condition for long-run equilibrium in the goods market?

  Demand equals supply
• What does the term $\frac{\partial Y}{\partial K} > 0$ imply about the production function?


  Positive marginal product of capital
• If a firm's production function is $Y =$$AN^\nu K^{1-\nu}$, what is the marginal product of capital?


  $\frac{\partial Y}{\partial K} =$$\frac{1-\nu}{K} Y$
• How does a decrease in capital (K) affect the marginal product of labour (MPL) in the Cobb-Douglas production function?

  MPL decreases

  
• What is the condition for long-run equilibrium in the factor markets?

  All factors of production are employed
• What does the term $\frac{\partial Y}{\partial N} > 0$ imply about the production function?


  Positive marginal product of labour
• If a firm's production function is $Y =$$AN^\nu K^{1-\nu}$, what is the marginal product of labour if $\nu =$$0.7$?


  $\frac{\partial Y}{\partial N} =$$\frac{0.7}{N} Y$
• How does an increase in labour (N) affect the marginal product of labour (MPL) in the Cobb-Douglas production function?

  MPL decreases

  
• What is the condition for long-run equilibrium in the capital market?

  Capital investment equals depreciation
• What does the term $\frac{\partial^2 Y}{\partial N^2} < 0$ imply about the production function?


  Diminishing marginal product of labour

  
• If a firm's production function is $Y =$$AN^\nu K^{1-\nu}$, what is the marginal product of capital if $\nu =$$0.7$?


  $\frac{\partial Y}{\partial K} =$$\frac{0.3}{K} Y$
• How does an increase in capital (K) affect the marginal product of capital (MPK) in the Cobb-Douglas production function?

  MPK decreases
• What is the condition for long-run equilibrium in the labour market?

  Supply of labour equals demand for labour
• What does the term $\frac{\partial^2 Y}{\partial K^2} < 0$ imply about the production function?


  Diminishing marginal product of capital
• If a firm's production function is $Y =$$AN^\nu K^{1-\nu}$, what is the marginal product of labour if $\nu =$$0.8$?


  $\frac{\partial Y}{\partial N} =$$\frac{0.8}{N} Y$
• How does a decrease in capital (K) affect the marginal product of capital (MPK) in the Cobb-Douglas production function?

  MPK increases
• What is the condition for long-run equilibrium in the goods market?

  Demand equals supply
• What does the term $\frac{\partial Y}{\partial K} > 0$ imply about the production function?


  Positive marginal product of capital
• If a firm's production function is $Y =$$AN^\nu K^{1-\nu}$, what is the marginal product of capital if $\nu =$$0.8$?


  $\frac{\partial Y}{\partial K} =$$\frac{0.2}{K} Y$
• How does a decrease in labour (N) affect the marginal product of labour (MPL) in the Cobb-Douglas production function?

  MPL increases