2. Assume the production function Y = K\alpha L(1-\alpha). Assume that the long-run supply curves for labor and capital are vertical. a. Draw a graph showing the effect of an exogenous decreases in the supply of capital on the rental price of capital. Label all axes and curves. b. Draw a graph showing the effect of an exogenous decrease in the supply of capital on the real wage. Label all axes and curves.

2. Assume the production function Y = K\alpha L(1-\alpha). Assume that the long-run supply curves for labor and capital are vertical. a. Draw a graph showing the effect of an exogenous decreases in the supply of capital on the rental price of capital. Label all axes and curves. b. Draw a graph showing the effect of an exogenous decrease in the supply of capital on the real wage. Label all axes and curves.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 16P

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