In an economy with unlimited supplies of labour the wage rate is fixed at 0.5 unit of consumption good per period. The economy has stock of machines each of which employs one unit of labour to produce either one unit of itself or one unit of consumption good.
1. What is the relative price of consumption good in terms of the machine ?
2. What is the rate of profit in the economy ?
"Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth."
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