1) Suppose the budget constraint is given by wL = pq, where L is labor hours, w is the wage, q is a consumption good and p is its price.
September 3, 2020
Suppose a firm’s production function is given by q = 2L + 2K. The firm’s target level of output is 20. Suppose that the wage rate is $5 per hour…
September 3, 2020

An owner can lease her building for $120,000 per year for three years.  The explicit cost of maintaining the building is $40,000, and the implicit cost is $55,000.  All revenues are received, and costs borne, at the end of each year.  If the interest rate is 5 percent, determine the present value of the stream of:

Instructions:Do not round intermediate calculations. Round your final calculation to two decimal places.

a. Accounting profits.


b. Economic profits.

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