Suppose that the economy's long-run output level is produced according to the following production function: and that A = 5, K= 400 and L = 100. Y = AK¹/2 L¹/2 d) Suppose that M = 2000 and that k = 2. What is the price level P at which the economy is in long-run- equilibrium? Plot such an equilibrium on a diagram with P on the vertical axis and Y on the horizontal axis, by distinguishing between the short-run and the long-run equilibrium.

Suppose that the economy's long-run output level is produced according to the following production function: and that A = 5, K= 400 and L = 100. Y = AK¹/2 L¹/2 d) Suppose that M = 2000 and that k = 2. What is the price level P at which the economy is in long-run- equilibrium? Plot such an equilibrium on a diagram with P on the vertical axis and Y on the horizontal axis, by distinguishing between the short-run and the long-run equilibrium.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.3P

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