Question: Based on the first-order conditions, explain how the search aspects of labor markets affect the firm's capital demand decisions. (Hint: Compare the FOC for the

  1. Based on the first-order conditions, explain how the search aspects of labor markets affect the firm's capital demand decisions. (Hint: Compare the FOC for the capital with the RBC model. Is it changing?). Compute the marginal product of capital and explain why it is equal to what you find that it is equal.

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