A firm has a c-d production function withnbspa05 a1 and, Ask an Expert

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A firm has a C-D production function with a=0.5, A=1, and fixed capital K=2.The nominal wage is W=$3, and the CPI today is at P=$6.

Questions:

1.How much labor does firm hire?

2.What happens to hired labor when there is a good productivity shock (that is A=1.5)?

3.What happens to hired labor when the nominal wage doubles (that is W=6)?

4.What happens to hired labor when the CPI increases (that is P=8)?

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