Hi everyone:

I derive the marginal costs of SOE following Prof.Dr Johannes Pfeifer chapter 3 nonliner derivation.

1. I derive the marginal cost which is equal to chapter 3, but the true marginal cost multiply by (TOT/REER), Why is this term there?

Marginal Cost equation of Gali chapter 8.pdf (95.4 KB)

2.Whether the relationship between isiosynacratic marginal costs and average marginal costs is identical to `(P*\P)^(-alpha*epsilon/(1-alpha)) in open economy.