<p>The equation is in logs. Thus,
<span class="math-container">$$MC_{t}=\frac{W_{t}/P_{t}}{MPN_{t}}$$</span>
<span class="math-container">$$mc_{t} = w_{t}-p_{t}-mpn_{t}$$</span>
And after that use
<span class="math-container">$$MPN_{t} = (1-\alpha)\frac{Y_{t}}{N_{t}} = (1-\alpha)A_{t}N_{t}^{-\alpha}$$</span>
also using <span class="math-container">$$N_{t} = \left(\frac{Y_{t}}{A_{t}}\right)^{\frac{1}{1-\alpha}}$$</span>
Then you obtain the expression above.</p>

CC BY-SA 4.0
2022-07-23T09:14:05.513Z
2022-07-23T09:14:05.513Z
Brasidas
<p>I'm studying Gali's work with the paper(or book?) which is
&quot;Jordi Gali, Monetary policy inflation and the business cycle_An introduction to the new keynesian framework(2015)&quot; and wonder one thing about setting marginal cost of a firm.</p>
<p>On the paper chapter 3 THE BASIC KEYNESIAN MODEL, with respect to the behavioral principal of firms, he suggests <strong>an individual firm’s marginal cost in terms of the economy’s average real marginal cost</strong> as
<a href="https://i.sstatic.net/ryZPU.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/ryZPU.png" alt="enter image description here" /></a></p>
<p>but I cannnot understand why the first equality works since I have been teached that w/p=mpn in general.</p>
<p>Anybody who let me know the solution idea to solve it??</p>
<p>thanks in advance.</p>

CC BY-SA 4.0
2021-02-01T15:22:48.463Z
Please type equations using [MathJax](https://math.meta.stackexchange.com/q/5020/70119).
Herr K.
CC BY-SA 4.0
2021-02-05T01:39:06.747Z
Please define what the variables are.
BB King
<macroeconomics><new-keynesian-economics><marginal>
About marginal cost setting on Jordi Gali's work
Jongho Choi
# About marginal cost setting on Jordi Gali's work

(Asked by: username_0 on 2021-02-01)

I'm studying Gali's work with the paper(or book?) which is
"Jordi Gali, Monetary policy inflation and the business cycle\_An introduction to the new keynesian framework(2015)" and wonder one thing about setting marginal cost of a firm.

On the paper chapter 3 THE BASIC KEYNESIAN MODEL, with respect to the behavioral principal of firms, he suggests **an individual firm’s marginal cost in terms of the economy’s average real marginal cost** as
[![enter image description here](https://i.sstatic.net/ryZPU.png)](https://i.sstatic.net/ryZPU.png)

but I cannnot understand why the first equality works since I have been teached that w/p=mpn in general.

Anybody who let me know the solution idea to solve it??

thanks in advance.

**Tags:** macroeconomics, new-keynesian-economics, marginal
> **Comments:**
> **username_1**: Please type equations using [MathJax](https://math.meta.stackexchange.com/q/5020/70119).  
> **username_2**: Please define what the variables are.  

---

## 1 answers

### Answer by username_3 on 2022-07-23. Score: 2

The equation is in logs. Thus,
$$MC\_{t}=\frac{W\_{t}/P\_{t}}{MPN\_{t}}$$
$$mc\_{t} = w\_{t}-p\_{t}-mpn\_{t}$$
And after that use
$$MPN\_{t} = (1-\alpha)\frac{Y\_{t}}{N\_{t}} = (1-\alpha)A\_{t}N\_{t}^{-\alpha}$$
also using $$N\_{t} = \left(\frac{Y\_{t}}{A\_{t}}\right)^{\frac{1}{1-\alpha}}$$
Then you obtain the expression above.


---

