Use the neoclassical theory of investment to explain why technological progress that reduces the price of computers (and related information technology) impacts investment differently than technological progress that makes computers more productive
What will be an ideal response?
Expected improvements in productivity cause the marginal product of capital curve to shift up. Reductions in the price of capital goods (such as computers) cause the user cost of capital curve to shift down. In either case, the desired level of capital and of investment increase. Expected reductions in the price of capital goods increase the user cost of capital. The size of the increase in the desired level of capital depends on the size of the expected productivity increase and the actual price decrease relative to the expected price decrease.
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Sarita is a macroeconomist studying the economy of Singapore. Which of the following areas of study would she be most interested in researching?
a. What management techniques do firms in Singapore typically use to train employees? b. Do consumer electronics firms prefer manufacturing in Singapore over China? c. How have government efforts to increase Singaporean wages affected the nation’s economy? d. How will Singaporean businesses respond to new reports of U.S. trade tariffs?
Refer to the information provided in Table 36.3 below to answer the question(s) that follow. Table 36.3 PointAggregate Income (Y)Aggregate Consumption (C) A 15 19 B 30 23 C 45 27 D 60 31 E 75 35 F 90 39The data in the table was used to estimate the following consumption function: C = 20 + 0.2YRefer to Table 36.3. The error for point C is equal to
A. -2. B. 0. C. +2. D. +4.
Which conditions must hold if a firm is to successfully engage in price discrimination?
A. It must be extremely difficult, if not impossible, for one consumer to resell a product to another. B. Firms must have a sufficiently low amount of market power. C. Consumers must have very similar preferences for the product. D. All of these are correct
Refer to Scenario 19.4 below to answer the question(s) that follow. SCENARIO 19.4: Suppose demand for widgets is given by the equation P = 10 - 0.25Q. Originally, the price of the good is $5 per unit. When a tax of $1 per unit is imposed, the price of the good rises to $6 per unit.Refer to Scenario 19.4. What is the excess burden of the tax?
A. $2 B. $18 C. $32 D. $50